HOMEWORK p1,2,5,6,10&11 Help Save Required information Problem 14-5A Straight-Li

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HOMEWORK p1,2,5,6,10&11 Help Save Required information Problem 14-5A Straight-Line: Amortization of bond premium and discount LO P1, P2, P3 The following information applies to the questions displayed below] Legacy issues $630,000 of 90%, fouryear bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. They are issued at $571,310 and their market rate is 12% at the issue date. Problem 14-5A Part 2 2. Determine the total bond interest expense to be recognized over the bonds life. repaid payments of Par at maturity Total r Prey 16 Next >

Explanation / Answer

2) Calculation of total bond interest expense (Amount in $)

3) Total Discount to be amortized = $630,000 - $571,310 = $58,690

Total semiannual periods = 8 periods

Discount to be amortized semiannually = $58,690/8 = $7,336.25

Amortization table for first two years (Amount in $)

Journal Entries (Amount in $)

Amount Repaid: 8 semi annual payments of $28,350 ($630,000*9%*6/12) (A) 226,800 Par value at matuarity (B) 630,000 Total repaid (C = A+B) 856,800 Less: Amount Borrowed (571,310) Total Bond interest expense 285,490

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