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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

    ________________________________________

    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

    © BrainMass Inc. brainmass.com December 24, 2021, 11:05 pm ad1c9bdddf
    https://brainmass.com/business/business-math/recording-bond-issuance-534607

    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
    ________________________________________

    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.
    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.

    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 $ 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
    Premium on 5% Bond 313594
    ________________________________________

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

    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
    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 $ 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
    Period-End Unamortized Premium Carrying
    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
    Premium on 5% Bonds 10453
    Cash at Bank 35000

    Dec. 31 Interest expenses 24547
    Premium on 5% Bonds 10453
    Cash at Bank 35000
    ________________________________________

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 11:05 pm ad1c9bdddf>
    https://brainmass.com/business/business-math/recording-bond-issuance-534607

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