3) Disco $4,000,000 of 6%, 15-year bonds dated January 1, 2015, that pay interes

Question

3) Disco $4,000,000 of 6%, 15-year bonds dated January 1, 2015, that pay interest issues Hilsde 30 and December 31. The bonds are issued at a price of $3,456448. semiannually Problem 14-2 Required re Straight-Line: Amortization of discount P1 P2 the January 1, 2015, journal entry to record the bonds' issuance. each semiannual period, compute (a) the cash payment, (b) the straight-line discount amortization. and (c) the bond interest expense. rmine the total bond interest expense to be recognized over the bonds' life. Check (3) $4 (4) 12 carrying value, 3. Dete pare the first two years of an amortization table like Exhibit 14.7 using the straight-line method. 5. Prepare the journal entries to record the first two interest payments

Explanation / Answer

Journal entry Date General Journal Debit Credit 1/1/2016 Cash 3,456,448 discount on bonds 543,552 bonds payable 4,000,000 2-a) par maturity value Annual rate / year semi annual cash payment 4,000,000 * 6% 6./12 120000 semi annual Straight line 2-b) par value bonds price discount periods disc amortization 4,000,000 - 3,456,448 = 543,552 / 30 = 18118 2-c) Semi annual cash discount bond interest expense payment amortization 120,000 + 18118 = 138,118 3) total bond interest expense over life of bonds amount repaid 30 payments of 120,000 3600000 par value ant maturity 4,000,000 total repaid 7600000 less amount borrowed -3,456,448 total bond interest expense. 4143552 (note bond interest expense may differ slightly due to rounding) 4) unamort Carrying period discount value 1/1/2016 543,552 3,456,448 6/30/2016 525,434 3,474,566 12/31/2016 507,315 3,492,685 6/30/2017 489,197 3,510,803 12/31/2017 471,078 3,528,922 5) Date General Journal Debit Credit 6/30/2016 interest expense 138,118 discount on bonds amortize 18,118 cash 120,000 31/12/2016 interest expense 138118.4 discount on bonds amortize 18,118 cash 120,000

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