Refer to the bond details in Problem 10-2A, except assume that the bonds are issued at a price of $4,895,980.

Hillside issues $4,000,000 of 6%, 15-year bonds dated January 1, 2018, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $3,456,448.

Required

1. Prepare the January 1, 2018, journal entry to record the bonds? issuance.

2. For each semiannual period, compute (a) the cash payment, (b) the straight-line premium amortization, and (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 10.11 using the straight-line method.

5. Prepare the journal entries to record the first two interest payments.

Transcribed Image Text:

Exhibit 10.11 Straight-Line Amortization of Bond Premium Carrying Value Semiannual Unamortized Period-End Premium" (0) 12/31/2018 $3,600 $103,600 (1) 6/30/2019 (2) 12/31/2019 2,700 102,700 101,800 1,800 900 (3) 6/30/2020 (4) 12/31/2020 100,900 During the bond life, carrying value is adjusted to par and the amortized premium to zero. 100,000 * Total bond premium of $3,600 less accumulated periodic amortization of $900 per semiannual intere st period. * Bond par value of $100,000 plus unamortized premium.