Question

Hillside issues $1700000 of 8%, 15 yrs bomds dated jan 1,2013, that pay interest, semiannually on june 30 and december 31. the bonds are issued at a price of $1468990.

a)record the issue of bonds qith per value of $1700000 cash on jan 1,2013 at an issue price of $1468990. b) for each semiannul period complete the table below to calculate the cash payment?

c) for each semiannual period complete the table below to calculate the bond interest expense

d) complete the below table to calculate the total bond interest expense to ne recognized over the bond's life

e) prapare the first two year of an amortization table using the straight line method

f) prepare the journal entries to record the first two interest payments

Answer 1

Solution:

Journal Entry for issue of Bonds
Jan 1, 2013	Cash	1468990
	Discount on Bonds Payable	231010
	Bonds Payable		1700000

Cash Payment
Face Value	1700000
Coupon Rate (Annual)	8%
Semi Annual	4%
Semi Annual Cash Payment	68000

Discount	231010
Amortization of Discount over 15 years - 30 periods	=231010/30
	7700.333
Add: Cash Payment	68000
Interest Expense	75700.33

Interest Expense over the life of the bond = 75700.33*30 = $2271010

Discount	231010
Amortization of Discount over 15 years - 30 periods	=231010/30
	7700.33 (Straight line amortization

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