Question

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 1

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