Ellis issues 9.5%, five-year bonds dated January 1, 2017, with a $470,000 par va

Question

Ellis issues 9.5%, five-year bonds dated January 1, 2017, with a $470,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $498,591. The annual market rate is 8% on the issue date. Required 1. Complete the below table to calculate the total bond interest expense over the bonds' life. 2. Prepare a straight-line amortization table for the bonds' life 3. Prepare the journal entries to record the first two interest payments. Complete this question by entering your answers in the tabs below Required 1 Required 2Required 3 Complete the below table to calculate the total bond interest expense over the bonds' life es Total bond interest expense over life of bonds: Amount repaid: payments of Par value at maturity Total repaid Less amount borrowed Total bond interest expense Required 2

Explanation / Answer

ans)

1. 470,000 X 9.5% X 5 = 223250

Less the total bond premium = (28591)

(498591 - 470,000) ________

Interest expense 194659

2) 28591 /10 = 2859.1 for each of the 10 six-month interest periods.

3) The entry is the same for each of the 10 interest periods.
The first two would be recorded on June 30, 2017 and December 31, 2017

Debit Interest Expense 19465.9
Debit Bond Premium 2859.1
Credit Cash (470,000 X 9.5% /2) 22325

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