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# Recording Bond Issuance

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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 payment \$

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 \$

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

________________________________________

Cash payment \$

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
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 This solution is FREE courtesy of BrainMass!

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
________________________________________

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

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

Total bond interest expense \$ 1240243

Total Interest = 1,400,000*5%*15 = 1,050,000
Add Discount on bonds to this interest to get total bond interest over bonds life.

Semiannual Period-End Unamortized Discount Carrying
Value
1/01/2011 \$ 190243 \$ 1209757
6/30/2011 183902 1216098
12/31/2011 177561 1222439
6/30/2012 171220 1228780
12/31/2012 164879 1235121
________________________________________

Note: Unamortized discount will reduce by \$6341 for each semiannual period & the Carrying Value of bond will increase by each amount for each semiannual period.

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 Interest Expenses 41341
Cash at Bank 35000
Discount on 5% Bonds 6341

Dec. 31 Interest Expenses 41341
Cash at Bank 35000
Discount on 5% Bonds 6341
________________________________________

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 Cash at Bank 1713594
5% Bonds Payable 1400000
________________________________________

Cash payment \$ 35000

Compute the interest similarly like calculated above. Note whether bonds issued at discount or premium, cash interest payment is same.
Interest payment =1,400,000*5%*6/12 = 35,000

Amount of premium amortized \$ 10453

Similarly, 313594/30 = 10453.13
2(c) For each semiannual period, compute the the bond interest expense. (Omit the "\$" sign in your response.)

Bond interest expense \$ 1050000

In this case, the bond interest expenses are same as cash interest payment.
3. Determine the total bond interest expense to be recognized over the bonds' life. (Omit the "\$" sign in your response.)

Total bond interest expense \$

Total Interest = 1,400,000*5%*15 = 1,050,000

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

Semiannual
Value
1/01/2011 \$ 313594 \$ 1713594
6/30/2011 303141 1703141
12/31/2011 292688 1692688
6/30/2012 282235 16822235
12/31/2012 271782 1671782
________________________________________
Note: Unamortized premium will reduce by \$10453 for each semiannual period & the Carrying Value of bond will reduce by each amount for each semiannual period.

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 Interest expenses 24547