Hillside issues $1,300,000 of 7%, 15-year bonds dated January 1, 2015, that pay

Question

Hillside issues $1,300,000 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 $1,591,194. 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 premium amortization

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

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

Explanation / Answer

Solution:

Working -

1. Premium to be amortized = $ 291,194

Number of periods = 30 ( 15 * 2)

Per period premium to be amortized = $ 291,194 / 30 = $ 9,706.47

Date Credit Balance in Bonds Payable account Credit Balance in Bonds premium account Book value of Bond Jan-01 1,300,000 291,194 1,591,194 Jun-30 1,300,000 281,488 1,581,488 Dec-31 1,300,000 271,781 1,571,781 Jun-30 1,300,000 262,075 1,562,075 Dec-31 1,300,000 252,368 1,552,368

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