The following information applies to the questions displayed beloy Legacy issues

Question

The following information applies to the questions displayed beloy Legacy issues $550,000 of 9.5%, four-year bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31, They are issued at $507301 and their market rate is 12% at the issue date. References eBook&Resources; Section Break Difficulty: 3 Hard Learning Objective: 14-P1 Prepare entries to rec expense 1. value: 0.62 points 2. Determine the total bond interest expense to be recognized over the bonds life. Total bond interest expense over life of bonds: Amount repaid: payments of Par value at maturity Total repaid Less amount borrowed bond interest expense 0

Explanation / Answer

1. Journal entry to record the issue of bond is as prepared below:

2. Total Bond interest expense to be recognized over the life of the bond is:

Year Particulars L.F Debit ($) Credit ($) 2015 Jan-01 Cash 507,301 Discount on Bonds payable 42,699 Bond Payable 550,000 (For 4 year bonds issued at discount)

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