Hillside issues $1,800,000 of 7%, 15-year bonds dated January 1, 2015, that pay

Question

Hillside issues $1,800,000 of 7%, 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 $1,555,401.

Prepare the January 1, 2015, 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.

Record the first interest payment on June 30, 2016.

Record the second interest payment on December 31, 2016.

Explanation / Answer

Solution:-

1. Prepare the January 1, 2015, 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:-

$244,599/30 = $8,153
15-year bonds with interest paid semiannually means there are 30 interest periods.

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:-

Thirty payments of $63,000 $1,890,000
Plus discount $244,599
= Total bond interest expense $2,134,599

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 payment:-

Record the first interest payment on June 30, 2016:-

Record the second interest payment on December 31, 2016:-

Please Rate or comment if you have any doubt regarding this solution.

Date General Journal Debit Credit Jan. 1, 2015 Cash 1,555,401 Discount on bonds payable 244,599 Bonds payable 1,800,000

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