Hillside issues $1,500,000 of 6%, 15-year bonds dated January 1, 2016, that pay
ID: 2587304 • Letter: H
Question
Hillside issues $1,500,000 of 6%, 15-year bonds dated January 1, 2016, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,835,994.
1. Prepare the January 1, 2016, journal entry to record the bonds’ issuance.
Record the issue of bonds with a par value of $1,500,000 cash on January 1, 2016 at an issue price of $1,835,994.
For each semiannual period, complete the table below to calculate the cash payment.
For each semiannual period, complete the table below to calculate the straight-line discount amortization.
For each semiannual period, complete the table below to calculate the bond interest expense
Complete the below table to compute the total bond interest expense to be recognized over the bonds' life.
Prepare the first two years of an amortization table using the straight-line method
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.
Date General Journal Debit Credit Jan 1Explanation / Answer
Ans. Journal Entry for issuing of bond par value $1500000 and Issuing price is $1835994
Jan 1 Cash A/c Dr $1835994
To 6% Bond A/c $1500000
To Premium on issue of bondA/c $335994
Calculation of semiannual cash interest payment
Par value Annual Rate Year Semiannual cash payment
$1500000 6% 1 $45000 ($1500000X6%X6/2)
$45000
Upto 15yrs
Calculation of Straight Line Amortisation
Par value Bond price Premium Semiannual period Semiannual amoritisation
$1500000 $1500000 $335994 30 NA
Calculation of Interest expenses
Bond face value $1500000
Rate of Intt 6% Annual and semiannual 3%
Intt exp semiannual (1500000X3%) = $45000
Calculation of Total Interest expenses recognized over the period
Total no of interest period (2X15) = 30
Total interest payment over the life of bond = 30X45000 = $1350000
Bond is issued on Premium so no need to for amortisation table
Journal Entries for recording Interest payment
June 30 2016
Interest Expeneses on 6% bond A/c Dr $45000
To Cash A/c $45000
(being semiannual interest paid for June 30 2016)
Dec 31 2016
Interest Expeneses on 6% bond A/c Dr $45000
To Cash A/c $45000
(being semiannual interest paid for Dec. 31 2016)
Profit and loss A/c Dr $90000
To Interest Exp. $90000
(Interest Expenses Transfer to Profit and loss A/c)
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