Analyzing and Reporting Financial Statement Effects of Bond Transactions

On January 1, 2016, Hutton Corp. issued $400,000 of 15-year, 12% bonds payable for $461,490, yielding an effective interest rate of 10%. Interest is payable semiannually on June 30 and December 31.

Required a. Show computations to confirm the issue price of $461,490. b. Prepare journal entries to record the bond issuance, semiannual interest payment and premium amortization on June 30, 2016, and semiannual interest payment and premium amortization on December 31, 2016. Use the effective interest rate method. c. Post the journal entries from part b to their respective T-accounts. d. Record each of the transactions from part b in the financial statement effects template.

Note: Round your answers to the nearest dollar. Present value of principal repayment $ 0 Present value of interest payments Selling price of bonds 0 $ $ 0 Note: Round your answers to the nearest dollar. General Journal Description Date Debit Credit 1/1/16 0 0 o 0 0 0 Bonds payable Interest expense 6/30/16 0 0 . 0 0 A 0 0 12/31/16 Interest expense 0 0 0 0 0 0 Cash (A) Bond Premium (L) Bonds Payable (L) 0 Interest Expense (E) 0 01/01/16 0 0 01/01/16 0 01/01/16 0 01/01/16 0 0 06/30/16 0 0 06/30/16 o 0 06/30/16 0 0 06/30/16 0 0 12/31/16 0 0 12/31/16 0 0 12/31/16 0 0 12/31/16 0 0 Income Statement Balance Sheet Noncash Contrib. Asset Liabilities Capital $ 0 = $ 400,000 + $ 0 Earned Capital Transaction Cash Asset + + + Revenues Net Income Expenses $ 0 1/1/19 Issue bonds at a premium $ 0 + $ 0 $ 0 $ 0 0 + 0 = 0 + 0 + 0 0 0 0 0 + 0 = 0 + 0 + 0 0 0 - = 0 6/30/19 Interest payment on bonds 12/31/19 Interest payment on bonds O 0 + 0 = 0 + 0 + 0 0 - = 0