Long Beach issues $4,500,000 of 8%, 15-year bonds dated January 1, 2009, that pays interest semiannually on June 30 and December 31. The bonds are issued at a price of $3,888,000.
Required
1. Prepare the January 1, 2009, journal entry to record the bonds’ issuance.
2. For each semiannual period, compute.
(a) The cash payment.
(b) The straight-line discount amortization.
(c) The bond interest expense.
3. Determine the total bond interest expense to be recognized over the bonds’ life.
4. Prepare the first two years of an amortization table like Exhibit using the straight-line method.
5. Prepare the journal entries to record the first two interest payments.
6. Assume that the bonds are issued at a price of $5,508,000. Repeat parts 1 through 5.