Problem 10-3B
Straight-line: Amortization of bond premium P1 P3
Refer to the bond details in Problem 10-2B, exceptassume that the bonds are issued at a price of $4,192,932.
Required
Prepare the January 1, 2013, journal entry to record the bonds'issuance.
For each semiannual period, compute (a) the cashpayment, (b) the straight-line premium amortization, and(c) the bond interest expense.
Determine the total bond interest expense to be recognized overthe bonds' life.
Prepare the first two years of an amortization table likeExhibit 10.11 using the straight-line method.
Prepare the journal entries to record the first two interestpayments.
Check
(3) $2,607,068
(4) 6/30/2014 carrying value, 4,073,991
1. Journal Entry:
Date Account Title Debit Credit Jan1 2013 Cash 3,010,000 Discount on issue ofBonds 390,000 10% Bonds Payable 3,400,000
2. Cash Payment for Each semiannual period:
3,400,000 x 5% = $170,000
Straight Line Discount amortization = 390,000 / 20 = $19,500
Bond Interest Expenses = 170,000 + 19,500 = $189,500
3. Total Bond Interest expenses = 189,500 x 20 = $3,790,000
4. Amortization Table:
Date Interest Payment Interest Expenses Amortization of BondDiscount Debit Balance in BondsDiscount Book Value of the Bonds 1 Jan 2013 390,000 3,010,000 30 June 2013 170,000 189,500 19,500 370,500 3,029,500 Dec31 2013 170,000 189,500 19,500 351,000 3,049,000
5. Journal entries for interest:
Date Account Title Debit Credit June 30, 2013 Interest Expenses 189,500 Discount on Issue ofBonds 19,500 Cash 170,000 Dec31, 2013 Interest Expenses 189,500 Discount on Issue ofBonds 19,500 Cash 170,000
Problem 10-3B
Straight-line: Amortization of bond premium P1 P3
Refer to the bond details in Problem 10-2B, exceptassume that the bonds are issued at a price of $4,192,932.
Required
Prepare the January 1, 2013, journal entry to record the bonds'issuance.
For each semiannual period, compute (a) the cashpayment, (b) the straight-line premium amortization, and(c) the bond interest expense.
Determine the total bond interest expense to be recognized overthe bonds' life.
Prepare the first two years of an amortization table likeExhibit 10.11 using the straight-line method.
Prepare the journal entries to record the first two interestpayments.
Check
(3) $2,607,068
(4) 6/30/2014 carrying value, 4,073,991
1. Journal Entry:
| Date | Account Title | Debit | Credit |
| Jan1 2013 | Cash | 3,010,000 | |
| Discount on issue ofBonds | 390,000 | ||
| 10% Bonds Payable | 3,400,000 |
2. Cash Payment for Each semiannual period:
3,400,000 x 5% = $170,000
Straight Line Discount amortization = 390,000 / 20 = $19,500
Bond Interest Expenses = 170,000 + 19,500 = $189,500
3. Total Bond Interest expenses = 189,500 x 20 = $3,790,000
4. Amortization Table:
| Date | Interest Payment | Interest Expenses | Amortization of BondDiscount | Debit Balance in BondsDiscount | Book Value of the Bonds |
| 1 Jan 2013 | 390,000 | 3,010,000 | |||
| 30 June 2013 | 170,000 | 189,500 | 19,500 | 370,500 | 3,029,500 |
| Dec31 2013 | 170,000 | 189,500 | 19,500 | 351,000 | 3,049,000 |
5. Journal entries for interest:
| Date | Account Title | Debit | Credit |
| June 30, 2013 | Interest Expenses | 189,500 | |
| Discount on Issue ofBonds | 19,500 | ||
| Cash | 170,000 | ||
| Dec31, 2013 | Interest Expenses | 189,500 | |
| Discount on Issue ofBonds | 19,500 | ||
| Cash | 170,000 |
Related questions
Hillside issues $1,800,000 of 7%, 15-year bonds dated January 1,2015, that pay interest semiannually on June 30 and December 31.The bonds are issued at a price of $1,555,401.
| Required: | |
| 1. | Prepare the January 1, 2015, journal entry to record the bondsâissuance. |
2(a) For each semiannual period, complete thetable below to calculate the cash payment.
2(b) For each semiannual period, complete thetable below to calculate the straight-line discountamortization.
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