Hillside issues $2,400,000 of 9%, 15-year bonds dated January 1, 2017, that pay

Question

Hillside issues $2,400,000 of 9%, 15-year bonds dated January 1, 2017, 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, 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 table to calculate the total bond interest expense to be recognized over the bonds' life. 4. Prepare the first two years of an amortization table using the straight-line method. 5. Prepare the journal entries to record the first two interest payments. Complete this question by entering your answers in the tabs below. Req 1 Req 2A to 20 Req 3 Req 4 Req 5 Prepare the January 1, 2017, journal entry to record the bonds' issuance. View transaction list View journal entry worksheet No Date General Journal Debit Credit Jan 01, 2017 Cash 2,400,000 Bonds payable 2,400,000 K Reg 1 Req 2A to 20 >

Explanation / Answer

Journal entry Date General Journal Debit Credit 1/1/2017 Cash 2,073,868 discount on bonds 326,132 bonds payable 2,400,000 2-a) par maturity value Annual rate / year semi annual cash payment 2,400,000 * 9% 6./12 108000 semi annual Straight line 2-b) par value bonds price Discount periods disc amortization 2,400,000 - 2,073,868 = 326,132 / 30 = 10871 2-c) Semi annual cash Discount bond interest expense payment amortization 108,000 + 10871 = 118,871 3) total bond interest expense over life of bonds amount repaid 30 payments of 108,000 3240000 par value ant maturity 2,400,000 total repaid 5640000 less amount borrowed 2,073,868 total bond interest expense. 3,566,132 (note bond interest expense may differ slightly due to rounding) 4) unamort Carrying period discount value 1/1/2017 326,132 2,073,868 6/30/2017 315,261 2,084,739 12/31/2017 304,390 2,095,610 6/30/2018 293,519 2,106,481 12/31/2018 282,648 2,117,352 5) Date General Journal Debit Credit 6/30/2016 interest expense 118,871 Discount on bonds payable 10,871 cash 108,000 31/12/2016 interest expense 118,871 discount on bonds payable 10,871 cash 108,000

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