Legacy issues $700,000 of 7.5%, four-year bonds dated January 1, 2016, that pay

Question

Legacy issues $700,000 of 7.5%, four-year bonds dated January 1, 2016, that pay interest semiannually on June 30 and December 31. They are issued at $643,419 and their market rate is 10% at the issue date.

Prepare the January 1, 2016, journal entry to record the bonds' issuance.

Record the issue of bonds with a par value of $700,000 cash on January 1, 2016 at an issue price of $643,419.

2. Determine the total bond interest expense to be recognized over the bonds' life.

3. Prepare a straight-line amortization table for the bonds' first two years.

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

1) Date General Journal Debit Credit 1/1/2016 Cash 643,419 Discount on bonds payable 56,581 bonds payable 700,000 2) total bond interest expense over life of bonds amount repaid 8 payments of 26250 210000 par value at maturity 700,000 total repaid 910000 less amount borrowed -643,419 total bond interest expense over life of bonds 266581 3) period unamortized CV Discount 1/1/2016 56,581 643,419 6/30/2013 49,508 650,492 12/31/2013 42,436 657,564 6/30/2017 35,363 664,637 12/31/2017 28,291 671,710 discount = 56581/8 7073 Date General Journal Debit Credit 30-Jun interest expense 33323 discount on notes payable 7073 cash 26250 31-Dec interest expense 33323 discount on notes payable 7073 cash 26250

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.