Record the first interest payment on June 30, 2015. Record the second interest p

Question

Record the first interest payment on June 30, 2015.

Record the second interest payment on December 31, 2015.

Hillside issues $2.400.000 of 9%, 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 $2,073,868 Required 1. Prepare the January 1, 2015, journal entry to record the bonds' issuance view transaction list view general journal General Journal Debit 2,073,868 326,132 Date Credit Jan 01, 2015 Cash Discount on bonds payable Bonds payable 2,400,000 2(a) For each semiannual period, complete the table below to calculate the cash payment emiannua Par (maturity) value Annual Rate Year interest 2,400,000 9%, /12$ 108,000 2(b) For each semiannual period, complete the table below to calculate the straight-line discount amortization scount on emiannua tr aight-line discount Par (maturity) value Bonds price ayable amortization 2,400,000 2(c) For each semiannual period, complete the table below to calculate the bond interest expense annual cash iscoun amortization Bond interest expense 3. Complete the below table to calculate 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 Total bond interest expense

Explanation / Answer

Par (maturity) value Bonds price Discount on Bonds Payable Semiannual periods Straight-line discount amortization $2,400,000 - $2,073,868 = $326,132 ÷ 30 = $10,871 Semiannual cash payment Discount amortization Bond interest expense $108,000 + $10,871 = $118,871 Total bond interest expense over life of bonds: Amount repaid: 30 payments of $108,000           3,240,000 Par value at maturity 2,400,000 Total repaid 5640000 Less amount borrowed -2,073,868 Total bond interest expense 3,566,132 Semiannual Period-End Unamortized Discount Carrying Value 1/1/2015 $326,132 $2,073,868 6/30/2015 315,261 2,084,739 12/31/2015 304,390 2,095,610 Date General Journal Debit Credit 30-Jun-15 Bond interest expense 118,871 Discount on bonds payable 10,871 Cash 108,000 31-Dec-15 Bond interest expense 118,871 Discount on bonds payable 10,871 Cash 108,000

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