Exercise 4-2
On January 1, 2012, Fromer issued $3,000,000 of 12-year, 7 percent bonds. Interest is paid semi-annually on June 30 and December 31. The issue price was $2,592,000.
1.Prepare the January 1, 2012, journal entry that records the bond issue.
1. Compute the following for each semi-annual period:
a. Cash payment.
b. Straight-line discount amortization.
c.Interest expense.
2.Determine the total interest expense recognized over the life of the bonds.
3.Prepare the first two years of an amortization table (use the straight-line method).
Semiannual
Period-End
Unamortized Discount
Carrying
Value
[Create your amortization table here.]
4.For distinguished performance, prepare journal entries for the first two interest payments.
Exercise 4-2
On January 1, 2012, Fromer issued $3,000,000 of 12-year, 7 percent bonds. Interest is paid semi-annually on June 30 and December 31. The issue price was $2,592,000.
1.Prepare the January 1, 2012, journal entry that records the bond issue.
1. Compute the following for each semi-annual period:
a. Cash payment.
b. Straight-line discount amortization.
c.Interest expense.
2.Determine the total interest expense recognized over the life of the bonds.
3.Prepare the first two years of an amortization table (use the straight-line method).
| Semiannual Period-End | Unamortized Discount | Carrying Value |
[Create your amortization table here.]
4.For distinguished performance, prepare journal entries for the first two interest payments.
Related questions
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 |
Hillside issues $1,500,000 of 6%, 15-year bonds dated January 1,2013, that pay interest semiannually on June 30 and December 31.The bonds are issued at a price of $1,296,168.
1. Record the issue of bonds with a par value of $1,500,000 cashon January 1, 2013 at an issue price of $1,296,168.
2. For each semiannual period, complete the table below tocalculate the cash payment.
3. For each semiannual period, complete the table below tocalculate the straight-line discount amortization.
4. For each semiannual period, complete the table below tocalculate the bond interest expense.
5.
| Complete the below table to calculate the total bond interestexpense to be recognized over the bonds' life 6.
|
