Hillside issues $4,000,000, 6%, 15-year bonds dated January 1, 2017. The bonds p

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.

Explanation / Answer

1 Date General Journal Debit Credit 1-Jan-17 Cash 3,456,448 Discount on bonds payable 543,552 Bonds payable 4000000 2a Par (maturity) value Annual Rate Year Semiannual cash interest payment $4,000,000 x 6% x 6/12 = $120,000 b Par (maturity) value Bonds price Discount on Bonds Payable Semiannual periods Straight-line discount amortization $4,000,000 - $3,456,448 = $543,552 ÷ 30 = $18,118 c Semiannual cash payment Discount amortization Bond interest expense $120,000 + $18,118 = $138,118 3 Total bond interest expense over life of bonds: Amount repaid: 30 payments of $120,000 $3,600,000 Par value at maturity 4,000,000 Total repaid 7600000 Less amount borrowed -3,456,448 Total bond interest expense 4143552 4 Semiannual Period-End Unamortized Discount Carrying Value 1/1/2017 $543,552 $3,456,448 6/30/2017 525,434 3,474,566 12/31/2017 507,316 3,492,684 6/30/2018 489,198 3,510,802 12/31/2018 471,080 3,528,920 5 Date General Journal Debit Credit 30-Jun-17 Bond interest expense 138,118 Discount on bonds payable 18,118 Cash 120,000 31-Dec-17 Bond interest expense 138,118 Discount on bonds payable 18,118 Cash 120,000

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.