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%2Fconnectnhed F paamweb%2Findex.html%239 https/newconnect.mheducation.com flow connect.htmlhsRegtrue&returnU-https; 63AS re Help Save & er 14-HOMEWORK-p1,2,5,6,10811 Problem 14-2A Straight-Line: Amortization of bond discount LO P1, P2 Hillside issues S11000 of9% 15-year bonds dated January 1, 2012 that pay interest semiannually on Ju The bonds are issued at a price of $950,524. osRequired: 1. Prepare the January 1, 2017, journal entry to record the bonds' issuance 2(a) For each semiannual period, complete the table below to calculate the cash payment 2/b) For each semiannual period, complete the table below to calculate the straight-line discount amortization. 2/c) For each semiannual period, complete the table below to calculate the bond interest expense. 3. Complete the below tabl 4. Prepare the first two years of an amortization table using the straight-ine method. s 5. Prepare the journal entries to record the first two interest payments le to calculate the total bond interest expense to be recognized over the bonds' life. Complete this question by entering your answers in the tabs below Req1 Req 2A to 2C Reg 3 Req 4 Req 5 Prepare the January 1, 2017, journal entry to record the bonds' issuance. View transaction list
Explanation / Answer
Answer:
1
Date
General Journal
Debit
Credit
1-Jan-17
Cash
950,524
Discount on bonds payable
149,476
Bonds payable
1,100,000
_________________________________________________
2
A) calculate the cash payment.
Par (maturity) value
Annual Rate
Year
Semiannual cash interest payment
$1,100,000
x
9.00%
x
,6/2
=
$49,500
b) calculate the straight-line discount amortization
Par (maturity) value
Bonds price
Discount on Bonds Payable
Semiannual periods
Straight-line discount amortization
$1,100,000
-
$950,524
=
$149,476
÷
30
=
$4,982.53
c)
calculate the bond interest expense.
Semiannual cash payment
Discount amortization
Bond interest expense
$49,500
+
$4,982.53
=
$54,482.53
__________________________________________
3)
Total bond interest expense over life of bonds:
Amount repaid:
30
payments of
$49,500
1485000
Par value at maturity
1,100,000
Total repaid
2,585,000
Less amount borrowed
-950,524
Total bond interest expense
1,634,476
_________________________________________
4)
Semiannual Period-End
Unamortized Discount
Carrying Value
1/1/2017
$149,476
$950,524
6/30/2017
144,493
955,507
12/31/2017
139,511
960,489
6/30/2018
134,528
965,472
12/31/2018
129,546
970,454
___________________________________
5)
Date
General Journal
Debit
Credit
30-Jun-17
Bond interest expense
54,482.53
Discount on bonds payable
4,982.53
Cash
49,500
31-Dec-17
Bond interest expense
54,482.53
Discount on bonds payable
4,982.53
Cash
49,500
Date
General Journal
Debit
Credit
1-Jan-17
Cash
950,524
Discount on bonds payable
149,476
Bonds payable
1,100,000
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