Ellis issues 8.0% five year bonds dated January 1, 2015, with a $600,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $651,185. The annual market rate is 6% on the issue date.

1. Compute the total bond interest expense over the bonds' life.

2. Prepare the effective interest amortization table for the bonds' life. (Enter all amounts positive values)

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

4. Use the market rate at issuance to compute the present value of the remaining cash flows for these bonds as of December 31, 2017. (Round table values to 4 decimal places, and use rounded values in calculations.

**INFO ATTACHED**

Bond issue entry: 1 Date Account Title Debit Credit 1-Jan-15 Cash 2,815,190 Bonds Payable 2,300,000 Premium on Bonds Payable 515,190 2(a) Par Value 2,300,000 x Annual Rate 8% Year / 2 Semi annual cash interest payment 92000 2(b) Bond Price 2,815,190 minus (-) Par Premium on Bonds 2,300,000 515,190 / Semiannual Straight line premium amortization 30 17173 2C Semi Annual cash payment 92000 minus (-) Premium Amor Bond Interest Expense 17173 74827 3 Total Bond Interest expense over life of bonds: Amount Repaid 30 Payments of Par value at maturity Total Repaid Less: Amount borrowed Total Bond Interest expenses 92000 2760000 2,300,000 5,060,000 2,815,190 2,244,810 4 First two year of amortization table: Semi annual Unamortized Premium Carrying value 1/1/2015 515,190 2,815,190 6/30/2015 498,017 2,798,017 12/31/2015 480,844 2,780,844 6/30/2016 463,671 2,763,671 12/31/2016 446,498 2,746,498 5 Journal Entry to record first two payment: Date Jun 30 15 General Journal Debit Credit Interest Expense 74827 Premium on Bonds Payable 17173 Cash 92000 31-Dec-15 Interest Expense Premium on Bonds Payable Cash 74827 17173 92000 Ellis issues 8%, five-year bonds dated January 1, 2015, with a $600,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $651,185. The annual market rate is 6% on the issue date. Required1. Calculate the total bond interest expense over the bonds' life. Amount repaid 10 Payments of Par value at maturity Total repaid Less amount borrowed Total Bond interest expense 24,000 240,000 600,000 840,000 (651,185) 188,815 2. Prepare the effective interest amortization table for the bonds' life. Semiannual period end Cash Interest paid Bond Interest Expense Premium Amortization Unamortized Premium Carrying Value 2015 1/1/2015 6/30/2015 12/31/2015 6/30/2016 12/31/2016 6/30/2017 12/31/2017 6/30/2018 12/31/2018 6/30/2019 12/31/2019 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 19,536 19,402 19,264 19,122 18,975 18,824 18,669 18,509 18,345 18,175 4,464 4,598 4,736 4,878 5,025 5,176 5,331 5,491 5,655 5,830 $51,185 46,721 42,122 37,386 32,507 27,483 22,307 16,976 11,486 5,830 0 $651,185 646,721 642,122 637,386 632,507 627,483 622,307 616,976 611,486 605,830 600,000 3. Prepare the journal entries to record the Frst two interest payments Date Account title & explanation 30-Jun Interest expense Premium on Bonds Payable Cash Debit Credit 19,536 4,464 24,000 31-Dec Interest expense Premium on Bonds Payable Cash 19,402 4,598 24,000 4. Use the market rate at issuance to compute the present value of the remaining cash flows for these bonds as of December 31, 2017. (Round tab Values are Based on: n= i= Cash Flow Par (maturity) value Interest (annuity) Price of bonds 4 3.00% Table Value 0.8885 3.7171 x x Amount $622,307 24,000 Present Value $552,919.87 89,210.40 $642,130.27 ble values to 4 decimal places, and use rounded values in calculations