Question

On January 1, 2018, White Water issues $560,000 of 6% bonds, due in 20 years, with interest payable annually on December 31 each year.

Assuming the market interest rate on the issue date is 5%, the bonds will issue at $629,789.

Required:

1. Complete the first three rows of an amortization table.

Date	Cash Paid	Interest Expense	Decrease in Carrying Value	Carrying Value
1/1/18
12/31/18
12/31/19

2. Record the journal entries for bond issue on January 1, 2018, and the first two interest payments on December 31, 2018, and December 31, 2019.

Answer 1

1
Date	Cash Paid	Interest Expense	Decrease in Carrying Value	Carrying Value
1/1/2018				629789
12/31/2018	33600	31489	2111	627678
12/31/2019	33600	31384	2216	625462
2
Jan-1-18	Cash	629789
	Bonds payable		560000
	Premium on Bonds payable		69789
Dec-31-18	Interest expense	31489
	Premium on Bonds payable	2111
	Cash		33600
Dec-31-19	Interest expense	31384
	Premium on Bonds payable	2216
	Cash		33600