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Recording Bond Issuance

1.

Heathrow issues $1,400,000 of 5%, 15-year bonds dated January 1, 2011, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,209,757.

Required:
1. Prepare the January 1, 2011, journal entry to record the bonds' issuance. (Omit the "$" sign in your response.)

Date General Journal Debit Credit
Jan. 1

________________________________________

2(a) For each semiannual period, compute the cash payment. (Omit the "$" sign in your response.)

Cash payment $

2(b) For each semiannual period, compute the the straight-line discount amortization. (Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

Amount of discount amortization $

2(c) For each semiannual period, compute the bond interest expense. (Round your intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

Bond interest expense $

3. Determine the total bond interest expense to be recognized over the bonds' life. (Omit the "$" sign in your response.)

Total bond interest expense $

4. Prepare the first two years of an amortization table using the straight-line method. (Round your intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response. Omit the "$" sign in your response.)

Semiannual Period-End Unamortized Discount Carrying
Value
1/01/2011 $ $
6/30/2011
12/31/2011
6/30/2012
12/31/2012
________________________________________

5. Prepare the journal entries to record the first two interest payments. (Round your intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

Date General Journal Debit Credit
June 30

Dec. 31

________________________________________

2.

Heathrow issues $1,400,000 of 5%, 15-year bonds dated January 1, 2011, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,713,594.

Required:
1. Prepare the January 1, 2011, journal entry to record the bonds' issuance. (Omit the "$" sign in your response.)

Date General Journal Debit Credit
Jan. 1

________________________________________

2(a) For each semiannual period, compute the cash payment. (Omit the "$" sign in your response.)

Cash payment $

2(b) For each semiannual period, compute the the straight-line premium amortization. (Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

Amount of premium amortized $

2(c) For each semiannual period, compute the the bond interest expense. (Omit the "$" sign in your response.)

Bond interest expense $

3. Determine the total bond interest expense to be recognized over the bonds' life. (Omit the "$" sign in your response.)

Total bond interest expense $

4. Prepare the first two years of an amortization table using the straight-line method. (Omit the "$" sign in your response.)

Semiannual
Period-End Unamortized Premium Carrying
Value
1/01/2011 $ $
6/30/2011
12/31/2011
6/30/2012
12/31/2012
________________________________________

5. Prepare the journal entries to record the first two interest payments. (Omit the "$" sign in your response.)

Date General Journal Debit Credit
June 30

Dec. 31

Solution Preview

1.

Heathrow issues $1,400,000 of 5%, 15-year bonds dated January 1, 2011, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,209,757.

Required:
1. Prepare the January 1, 2011, journal entry to record the bonds' issuance. (Omit the "$" sign in your response.)

Date General Journal Debit Credit
Jan. 1 Cash at Bank (bond issued at this price) 1209757
Discount on 5% Bonds (1,400,000 - 1,209,757) 190243
5% Bonds Payable 1400000
________________________________________

2(a) For each semiannual period, compute the cash payment. (Omit the "$" sign in your response.)

Cash payment $ 35,000
Interest payment =1,400,000*5%*6/12 = 35,000

2(b) For each semiannual period, compute the the straight-line discount amortization. (Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

Amount of discount amortization $6341

Total no. of Interest payments = 15*2 = 30
Amortization per period = 190243/30 = 6341.43

2(c) For each semiannual period, compute the bond interest expense. (Round your intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

Bond interest expense $41341

Interest expenses will be 35000+6341.
There will be 2 entries...
1. Dr Interest Expenses 35000 & Cr. Cash paid to bondholders.
2. Dr. Interest Expenses 6341 & Cr. Discount on Bonds. ...

Solution Summary

The recording bond issuance are examined.

$2.19