Hillside issues $2.600,000 of 5%, 15-year bonds cated January 1 2016, that pay i

Question

Hillside issues $2.600,000 of 5%, 15-year bonds cated January 1 2016, that pay interest sem anuary on June 30 and December 31. The bonds are issued at a price of $2,246,690 Required: 1. Prepare the January 1, 2016, journal entry to record the bonds issuance View transaction list Journal entry worksheet Record the issue of bonds with a par value of $2,600,000 cash on January 2016 at an issue price of $2,246,690 Note Ener debits before crefits General Journal Debit C Jan 01, 2010 View general journal Clear entry Record entry

Explanation / Answer

Journal entry Date General Journal Debit Credit 1/1/2016 Cash 2,246,690 discount on bonds 353,310 bonds payable 2,600,000 2-a) par maturity value Annual rate / year semi annual cash payment 2,600,000 * 5% 6./12 65000 semi annual Straight line 2-b) par value bonds price discount periods disc amortization 2,600,000 - 2,246,690 = 353,310 / 30 = 11777 2-c) Semi annual cash discount bond interest expense payment amortization 65,000 + 11777 = 76777 3) total bond interest expense over life of bonds amount repaid 30 payments of 65,000 1950000 par value ant maturity 2,600,000 total repaid 4550000 less amount borrowed -2,246,690 total bond interest expense. 2303310 4) unamort Carrying period discount value 1/1/2016 353,310 2,246,690 6/30/2016 276,533 2,323,467 12/31/2016 199,756 2,400,244 6/30/2017 122,979 2,477,021 12/31/2017 46,202 2,553,798 5) Date General Journal Debit Credit 6/30/2016 interest expense 76777 discount on bonds amortize 11,777 cash 65,000 31/12/2016 interest expense 76777 discount on bonds amortize 11,777 cash 65,000

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