Question

February 1, 2017 Sold $300,000 10-year 10% bond at a yield of 8%. Interest is paid semiannually on January 1 and July 1. Make necessary entries for the sale of the bond as well as the interest payments for the years 2017 through 2019. Use straight line method of amortization.

Answer 1

Table Value Based on
n=	20.00	(10 years X 2)
i=	4.00	(8% / 2)
Cash Flow	Amount	Present Value
Interest - $300,000 X 10% X 6/12	15,000.00	203,855
		($15,000 X 13.59033)
Principal	300,000.00	136,917
		($300,000 X 0.45639)
Issue Price of Bond 1		340,772
Premium on issue of Bond		40,772

Amortization Schedule
Straight Line Method
	A	B	C	D	E
Semi-Annual Interest Period	Interest Payment - $300,000 X 10% X 6/12	Interest Expense -      B = A + C	Premium Amortization	Unamortized Premium (D - C)	Bond Carrying Amount ($300,000 + D)
02/01/17	-	-	-	40,772.00	340,772.00
07/01/17	15,000.00	12,961.40	2,038.60	38,733.40	338,733.40
01/01/18	15,000.00	12,961.40	2,038.60	36,694.80	336,694.80
07/01/18	15,000.00	12,961.40	2,038.60	34,656.20	334,656.20
01/01/19	15,000.00	12,961.40	2,038.60	32,617.60	332,617.60
07/01/19	15,000.00	12,961.40	2,038.60	30,579.00	330,579.00
01/01/20	15,000.00	12,961.40	2,038.60	28,540.40	328,540.40

Journal Entry
Date	Particualrs	Dr. Amt	Cr. Amt
	Amortization of Discount - Effective Interest Method
02/01/17	Cash	343,272.00
	Bonds Payable		300,000.00
	Premium on Issue f Bonds		40,772.00
	Interest Payable		2,500.00
	(Record the interest paybable)
07/01/17	Interest Exp.	10,461.40
	Premium on Issue f Bonds	2,038.60
	Interest Payable	2,500.00
	Cash		15,000.00
	(Record the interest paid)
12/31/17	Interest Exp.	12,961.40
	Premium on Issue f Bonds	2,038.60
	Interest Payable		15,000.00
	(Record the interest due)
01/01/18	Interest Payable	15,000.00
	Cash		15,000.00
	(Record the interest paid)
07/01/18	Interest Exp.	12,961.40
	Premium on Issue f Bonds	2,038.60
	Cash		15,000.00
	(Record the interest paid)
12/31/18	Interest Exp.	12,961.40
	Premium on Issue f Bonds	2,038.60
	Interest Payable		15,000.00
	(Record the interest due)
01/01/19	Interest Payable	15,000.00
	Cash		15,000.00
	(Record the interest paid)
07/01/19	Interest Exp.	12,961.40
	Premium on Issue f Bonds	2,038.60
	Cash		15,000.00
	(Record the interest paid)
12/31/19	Interest Exp.	12,961.40
	Premium on Issue f Bonds	2,038.60
	Interest Payable		15,000.00
	(Record the interest due)