Question

Ellis issues $250,000, 6.5%, 5-year bonds dated January 1, 2017. The bonds pay interest semi-annually on...

Ellis issues $250,000, 6.5%, 5-year bonds dated January 1, 2017. The bonds pay interest semi-annually on June 30 and December 31. The bonds were issued at $255,333.

1. Record the journal entry to issue the bonds on January 1, 2017.

2. a. Record the journal entry to pay the semi-annual interest payment and amortize the premium on June 30, 2017.

b. Record the journal entry to pay the semi-annual interest payment and amortize the premium on Dec. 31, 2017.

3. a. Record the journal entry to pay the semi-annual interest payment and amortize the premium on June 30, 2018.

b. Record the journal entry to pay the semi-annual interest payment and amortize the premium on Dec. 31, 2018.

4. On September 1, 2020, Ellis calls the bonds at 99. Record the journal entry to call the bonds.

5. What is the total interest expense for the bonds for:

a. One full year?

b. The entire five year life of the bond? (if the bond had been held until maturity)

6. What is the carrying value of the bonds on:

a. December 31, 2017?

b. December 31, 2018?

I understand questions 1-3, but i do not understand questions 4-6.

Homework Answers

Answer #1

First of all Market interest rate should be 6% in this ques. Since you've understood the questions 1-3 that's why i'm just answering questions 4-6.

4. On 1 September 2020

Bonds Payable (Debit) $ 250000

Premium on Bonds payable (Debit) $1770

Gain on Retirement of debt (Credit) $ 4270

Cash (Credit) $ 247500

5. A) & B) Total interest expenses :

Year Interest Payment ($) Interest Expense ($)
2017
16250
15306
2018
16250
15249
2019
16250
15188
2020
16250
15123
2021
16250
15054
Total
81250
75919

6. A) & B) Carrying Value of the bonds as on:

31 December 2017 = $ 254389

31 December 2018 = $ 253388

Thank you

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On January 1, 2017, Boston Enterprises issues bonds that have a $2,100,000 par value, mature in...
On January 1, 2017, Boston Enterprises issues bonds that have a $2,100,000 par value, mature in 20 years, and pay 7% interest semiannually on June 30 and December 31. The bonds are sold at par.    1. How much interest will Boston pay (in cash) to the bondholders every six months? 2. Prepare journal entries to record (a) the issuance of bonds on January 1, 2017; (b) the first interest payment on June 30, 2017; and (c) the second interest...
Trader Joes issues $5,000,000 of 8%, 4-year bonds dated January 1, 2013, that pay interest semiannually...
Trader Joes issues $5,000,000 of 8%, 4-year bonds dated January 1, 2013, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of 5,030,00 Prepare the January 1, 2013, journal entry to record the issuance. For each semiannual period, compute the cash payment, the straight-line premium or discount amortization the bond interest expense Cash proceeds= Cash proceeds= Bonds interest expense= cash interest paid + bond discount Bonds interest expense= Bonds interest expense= Bonds...
On June 30, 2017, Novak Company issued $4,400,000 face value of 13%, 20-year bonds at $4,731,010,...
On June 30, 2017, Novak Company issued $4,400,000 face value of 13%, 20-year bonds at $4,731,010, a yield of 12%. Novak uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. Prepare the journal entries to record the following transactions: 1.) The issuance of bonds on June 30, 2017. 2.) The payment of interest and the amortization of the premium on December 31, 2017. 3.) The payment of interest...
On June 30, 2017, Novak Company issued $4,400,000 face value of 13%, 20-year bonds at $4,731,010,...
On June 30, 2017, Novak Company issued $4,400,000 face value of 13%, 20-year bonds at $4,731,010, a yield of 12%. Novak uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31. Prepare the journal entries to record the following transactions: (1) The issuance of the bonds on June 30, 2017. (2) The payment of interest and the amortization of the premium on December 31, 2017. (3) The payment of...
Effective Interest Amortization On January 1, Eagle, Inc., issued $950,000 of 9%, 20-year bonds for $1,016,500...
Effective Interest Amortization On January 1, Eagle, Inc., issued $950,000 of 9%, 20-year bonds for $1,016,500 yielding an effective interest rate of 8%. Semiannual interest is payable on June 30 and December 31 each year. The firm uses the effective interest method to amortize the premium. Required a. Prepare an amortization schedule showing the necessary information for the first two interest periods. Round amounts to the nearest dollar. b. Prepare the journal entry for the bond issuance on January 1....
On January 1, 2017, British Software Ltd. issued $450,000 of 20-year, 8% bonds that pay interest...
On January 1, 2017, British Software Ltd. issued $450,000 of 20-year, 8% bonds that pay interest semiannually on June 30 and December 31. The bonds were sold to investors at their par value. a. How much interest will British pay to the holders of these bonds every six months? Amount of interest b. Prepare the journal entries that British would make to record: (1) the issuance of the bonds on January 1, 2017; (2) the first interest payment on June...
Houston Company authorized a $1,000,000, 10-year, 9% bond issue dated July 1, 2017, with semi-annual interest...
Houston Company authorized a $1,000,000, 10-year, 9% bond issue dated July 1, 2017, with semi-annual interest to be paid each December 31 and June 30. On July 1, 2017, the market rate of interest bonds 7.5% and Houston Company has a December 31 year-end. - What is the journal entry to record the sale of the bonds? - What is the required journal entry on December 31, 2017 to record amortization (use the effective interest method.) No adjusting journal entries...
Hillside issues $2,500,000 of 6%, 15-year bonds dated January 1, 2015, that pay interest semiannually on...
Hillside issues $2,500,000 of 6%, 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 $3,059,990. Required: 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 premium amortization. (Round "Unamortized Premium" to whole dollar and...
Quatro Co. issues bonds dated January 1, 2017, with a par value of $820,000. The bonds’...
Quatro Co. issues bonds dated January 1, 2017, with a par value of $820,000. The bonds’ annual contract rate is 10%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8%, and the bonds are sold for $862,972. 1. What is the amount of the premium on these bonds at issuance? 2. How much total bond interest expense will be recognized over...
Hillside issues $1,200,000 of 8%, 15-year bonds dated January 1, 2016, that pay interest semiannually on...
Hillside issues $1,200,000 of 8%, 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 $1,036,935. Required: 1. Prepare the January 1, 2016, 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...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT