Hillside issues $2,200,000 of 7%, 15-year bonds dated January 1, 2015, that pay

Question

Hillside issues $2,200,000 of 7%, 15-year bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,901,046.

Prepare the January 1, 2015, journal entry to record the bonds’ issuance

For each semiannual period, complete the table below to calculate the cash payment.

For each semiannual period, complete the table below to calculate the straight-line discount amortization.

For each semiannual period, complete the table below to calculate the bond interest expense.

Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life.

Prepare the first two years of an amortization table using the straight-line method.

Record the first interest payment on June 30, 2015.

Hillside issues $2,200,000 of 7%, 15-year bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,901,046.

Prepare the January 1, 2015, journal entry to record the bonds’ issuance

For each semiannual period, complete the table below to calculate the cash payment.

For each semiannual period, complete the table below to calculate the straight-line discount amortization.

For each semiannual period, complete the table below to calculate the bond interest expense.

Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life.

Prepare the first two years of an amortization table using the straight-line method.

Record the first interest payment on June 30, 2015.

Explanation / Answer

Transaction number

DATE

             ACCOUNT

DEBIT

CREDIT

2015

1

Jan. 1

Cash

Discount on Bonds Payable

    Bonds Payable

1,901,046

298,954

2,200,000

2

June 30

Interest Expense

      Cash

      Discount on Bonds Payable

86,965.13

77,000.00

9965.13

Semi-annual interest payment = $2,200,000 x 0.07 x 0.5 = $9,000

The total discount of $298,954 is amortized over 15 years. Since interest is paid twice a year, the amount of discount amortized at the time of each interest payment = $298,954 /30= $9,965.13

Date

Interest Payable

Interest Expense

Amortization of Discount

Discount

Carrying Value of Bond

Jan. 1, 2015

298,954

1,901,046

June 30, 2015

77000

86,965.13

9965.13

288,988.87

1,911,011.13

Dec. 31, 2015

77000

86,965.13

9965.13

279,023.74

1,920,976.26

June 30, 2016

77000

86,965.13

9965.13

269,058.61

1,930,941.39

Dec. 31, 2016

77000

86,965.13

9965.13

259,093.48

1,940,906.52

Dec. 31, 2016

77000

86,965.13

9965.13

249,128.35

1,950,871.65

Dec. 31, 2016

77000

86,965.13

9965.13

239,163.22

1,960,836.78

Dec. 31, 2016

77000

86,965.13

9965.13

229,198.09

1,970,801.91

Dec. 31, 2016

77000

86,965.13

9965.13

219,232.96

1,980,767.04

Dec. 31, 2016

77000

86,965.13

9965.13

209,267.83

1,990,732.17

Dec. 31, 2016

77000

86,965.13

9965.13

199,302.70

2,000,697.30

Dec. 31, 2016

77000

86,965.13

9965.13

189,337.57

2,010,662.43

Dec. 31, 2016

77000

86,965.13

9965.13

179,372.44

2,020,627.56

Dec. 31, 2016

77000

86,965.13

9965.13

169,407.31

2,030,592.69

Dec. 31, 2016

77000

86,965.13

9965.13

159,442.18

2,040,557.82

Dec. 31, 2016

77000

86,965.13

9965.13

149,477.05

2,050,522.95

Dec. 31, 2016

77000

86,965.13

9965.13

139,511.92

2,060,488.08

Dec. 31, 2016

77000

86,965.13

9965.13

129,546.79

2,070,453.21

Dec. 31, 2016

77000

86,965.13

9965.13

119,581.66

2,080,418.34

Dec. 31, 2016

77000

86,965.13

9965.13

109,616.53

2,090,383.47

Dec. 31, 2016

77000

86,965.13

9965.13

99,651.40

2,100,348.60

Dec. 31, 2016

77000

86,965.13

9965.13

89,686.27

2,110,313.73

Dec. 31, 2016

77000

86,965.13

9965.13

79,721.14

2,120,278.86

Dec. 31, 2016

77000

86,965.13

9965.13

69,756.01

2,130,243.99

Dec. 31, 2016

77000

86,965.13

9965.13

59,790.88

2,140,209.12

Dec. 31, 2016

77000

86,965.13

9965.13

49,825.75

2,150,174.25

Dec. 31, 2016

77000

86,965.13

9965.13

39,860.62

2,160,139.38

Dec. 31, 2016

77000

86,965.13

9965.13

29,895.49

2,170,104.51

Dec. 31, 2016

77000

86,965.13

9965.13

19,930.36

2,180,069.64

Dec. 31, 2016

77000

86,965.13

9965.13

9,965.23

2,190,034.77

Dec. 31, 2016

77000

86,965.13

9965.13

0

2,200,000

Total

2608954

298954

Transaction number

DATE

             ACCOUNT

DEBIT

CREDIT

2015

1

Jan. 1

Cash

Discount on Bonds Payable

    Bonds Payable

1,901,046

298,954

2,200,000

2

June 30

Interest Expense

      Cash

      Discount on Bonds Payable

86,965.13

77,000.00

9965.13

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