Question

# bond premium ordiscount using the way of the straight line amorizatioon A company issues 2,000,000 dollars...

bond premium ordiscount using the way of the straight line amorizatioon

A company issues 2,000,000 dollars of eight percent, four-year bonds that is started in 1/1, in the year of "two thousand and seventeen". giving out the interest semi-annually on 6/30 and 12/31. Bonds are issued and having the price, \$1,950,000

a. Prepare the 1/1, two thousand and seventeen journal entry to have the issuance of bond.

b. For every semi-annual time, make; (1) the payment of cash,(2) the discount amortization,(3)interest expense of the bond ( 4). Unamortized discount, (5) carrying value on the bond.

c. Calculate "total bond interest expense" during the bonds’ life.

d. Make table of bond amortization using the straight line method.

e.Make journal entries to have every interest payments.

f. Make journal entry to have the payback of the bond in the time of maturity.

 Answer a Answer b & d The 1/1, two thousand and seventeen journal entry to have the issuance of bond. Semi annual period Payment of Cash Discount Amortization Interest expense Unamortizaed discount Carrying value of bond Date Account Titles Debit Credit 0 \$50,000.00 \$1,950,000.00 01/01/2017 Cash \$1,950,000.00 1 \$80,000.00 \$6,250.00 \$86,250.00 \$43,750.00 \$1,956,250.00 Discount on Bonds Payable \$50,000.00 2 \$80,000.00 \$6,250.00 \$86,250.00 \$37,500.00 \$1,962,500.00 Bonds Payable \$2,000,000.00 3 \$80,000.00 \$6,250.00 \$86,250.00 \$31,250.00 \$1,968,750.00 4 \$80,000.00 \$6,250.00 \$86,250.00 \$25,000.00 \$1,975,000.00 Answer c 5 \$80,000.00 \$6,250.00 \$86,250.00 \$18,750.00 \$1,981,250.00 Total bond interest expense = \$86250 * 8 semi annual periods = \$6,90,000 6 \$80,000.00 \$6,250.00 \$86,250.00 \$12,500.00 \$1,987,500.00 7 \$80,000.00 \$6,250.00 \$86,250.00 \$6,250.00 \$1,993,750.00 Answer e 8 \$80,000.00 \$6,250.00 \$86,250.00 \$0.00 \$2,000,000.00 Journal entry to have every interest payments. Date Account Titles Debit Credit The payment of cash per semi annual period = [Par value of bond * Coupon rate]/2 30/06/2017 Interest expense \$86,250.00 The payment of cash per semi annual period = [\$2000000*8%]/2 = \$80,000 Discount on Bonds Payable \$6,250.00 Bonds Payable \$80,000.00 The discount amortization per semi annual period = Discount on Bonds Payable / No.of semiannual period 31/12/2017 Interest expense \$86,250.00 The discount amortization per semi annual period = \$50000 / 8 = \$6250 Discount on Bonds Payable \$6,250.00 Bonds Payable \$80,000.00 Interest expense of the bond per semi annual period = Cash payment + Discount amortization 30/06/2018 Interest expense \$86,250.00 Interest expense of the bond per semi annual period = \$80000 + \$6250 = \$86,250 Discount on Bonds Payable \$6,250.00 Bonds Payable \$80,000.00 31/12/2018 Interest expense \$86,250.00 Discount on Bonds Payable \$6,250.00 Bonds Payable \$80,000.00 30/06/2019 Interest expense \$86,250.00 Discount on Bonds Payable \$6,250.00 Bonds Payable \$80,000.00 31/12/2019 Interest expense \$86,250.00 Discount on Bonds Payable \$6,250.00 Bonds Payable \$80,000.00 30/06/2020 Interest expense \$86,250.00 Discount on Bonds Payable \$6,250.00 Bonds Payable \$80,000.00 31/12/2020 Interest expense \$86,250.00 Discount on Bonds Payable \$6,250.00 Bonds Payable \$80,000.00 Answer f Journal entry to have the payback of the bond in the time of maturity. Date Account Titles Debit Credit 31/12/2020 Bonds Payable \$2,000,000.00 Cash \$2,000,000.00