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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

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    https://brainmass.com/business/business-math/recording-bond-issuance-534607

    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