Problem 10-2A Straight-Line: Amortization of bond discount LO P1, P2

Hillside issues $1,200,000 of 8%, 15-year bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,036,935.

Required:

1.

Prepare the January 1, 2015, journal entry to record the bonds issuance.

Date	General Journal	Debit	Credit
Jan 01, 2015

2(a)

For each semiannual period, complete the table below to calculate the cash payment.

Par (Maturity) Value	Annual Rate	Year		Semiannual Cash Interest Payment
			=

2(b)

For each semiannual period, complete the table below to calculate the straight-line discount amortization.

Par (Maturity Value)	Bonds Price		Discounts on bonds Payable		Semi annual Periods		Straight-line discount amortization
		=				=

2(c)

For each semiannual period, complete the table below to calculate the bond interest expense.

Semi Anuual Cash Payment	Discount Amorizaition Bond Expense
	=

3.

Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life.

Total Bond Interest Expense Over life of Bonds

Amount Repaid :
	Payments Of
Per Value Maturity :
Total Repiad:
Less Amount Borrowed:
Total Bond Interest Expense:		$

4

Prepare the first two years of an amortization table using the straight-line method.

Semi Annual Period End	Unamoritized Discount	Carrying Value
01/01/2013
06/30/2013
12/31/2013
06/30/2014
12/31/2014

5

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

Record the first interest payment on June 30, 2015.

Date	General Journal	Debit	Credit
Jun 30, 2015

Record the second interest payment on December 31, 2015.

Date

General Journal

Debit

Credit

Dec 31,2015