Hillside issues 4,000,000, 6% 15-year bonds dated January 1,2017. The bonds pay
ID: 2430575 • Letter: H
Question
Hillside issues 4,000,000, 6% 15-year bonds dated January 1,2017. The bonds pay interest semi-annually on June 30 and December 31. The bonds were issued at $3,456,448
1. Record the journal entry to issue the bonds on January 1,2017
2. a. record the journal entry to pay the semi-annual interest payment and amortize the discount on June 30,2017
b. Record the journal entry to pay the semi-annual interest payment and amortize the discount on dec. 31,2017
3. a. record the journal entry to pay the semi-annual interest payment and amortize the discount on June 30,2018
b. Record the journal entry to pay the semi-annual interest payment and amortize the discount on Dec. 31,2018
4. On March 31,2022, Hillside calls the bonds at 101. Record the journal entry to the call the bonds
5. What is the total interest expense for the bonds for:
a. one full year?
b. The entire fifteen year life of the bond?(if the bond had been held until maturity)
6. What is carrying value of the bonds on:
a. December 31,2017 ?
b. December 31,2018 ?
Explanation / Answer
1) Journal Entry (Amounts in $)
2) (It is assumed that the company uses straight line method to amortize the discount on bonds payable).
Cash Payment of Interest = Face Value of Bonds*Interest Rate*6/12
= $4,000,000*6%*6/12 = $120,000
Total no. of semi annual periods = 15 years*2 = 30 periods
Discount on Bonds Payable to be amortized each period = $543,552/30 = $18,118
Bond Interest Expense = Cash Payment + Discount Amortized
= $120,000 + $18,118 = $138,118
Journal Entries (Amounts in $)
3) Journal Entries (Amounts in $)
4) Journal Entry (Amounts in $)
Date General Journal Debit Credit Jan 1, 2017 Cash 3,456,448 Discount on Bonds Payable (Bal fig) (4,000,000-3,456,448) 543,552 Bonds Payable 4,000,000 (To record the issue of bonds)Related Questions
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