Hillside issues $3,000,000 of 6%, 15-year bonds dated January 1, 2015, that pay

Question

Hillside issues $3,000,000 of 6%, 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 $3,671,990. Required 1. Prepare the January 1, 2015, journal entry to record the bonds'issuance. View transaction list Journal entry worksheet Record the issue of bonds with a par value of $3,000,000 cash on January 1, 2015 at an issue price of $3,671,990. Note: Enter debits before credits. Date General Journal Debit Credit Jan 01, 2015 Record entry Clear entry View general journal

Explanation / Answer

1) Date General Journal Debit Credit 1/1/2015 Cash 3,671,990 premium on bonds 671,990 Bonds payable 3,000,000 2-a) par(maturity) annual year Semi annual value rate intt payment 3,000,000 * 6% * 1./2 = 90000 2-b) bond price par maturity premium on semi annual Straight line value bonds issue periods pre amort 3,671,990 - 3,000,000 = 671,990 / 30 = 22400 2-c) semi annual premium bond intt cash pay amortization expense 90,000 - 22,400 = 67600 3) total bond interest expense over life of bonds Amount repaid: 30 payments of 90,000 2700000 par value at maturity 3,000,000 total repaid 5700000 less amount borrowed -3,671,990 total bond interest expense. 2028010 4) period unamortixed Carrying premium value 1/1/2015 649,590 3,649,590 6/30/2015 627,190 3,627,190 12/31/2015 604,790 3,604,790 6/30/2016 582,390 3,582,390 12/31/2016 559,990 3,559,990 5) Date General Journal Debit Credit 6/30/2015 interest expense 67,600 preimum on bonds 22,400 cash 90,000 12/31/2015 interest expense 67,600 preimum on bonds 22,400 cash 90,000

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