Problem 10-9AB Effective Interest: Amortization of bond premium 6 Refer to the bond details in Problem 10-3A. Required 1. Compute the total bond interest expense over the bonds life. 2. Prepare an effective interest amortization table like the one in Exhibit 10B.2 for the bonds' life. Check (2) 6/30/2021 carrying value, $252,865 3. Prepare the journal entries to record the first two interest payments. Problem 10-3A Straight-Line: Amortization of bond premium CP3 Ellis Company issues 6.5%, five-year bonds dated January 1, 2019, with a $250,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $255,333. The annual market rate is 6% on the issue date. (E) EXHIBIT 10B.2 Effective Interest Amortization of Bond Premium Bonds: $100,000 Par Value, Semiannual Interest Payments, Two-Year Life, 6% Semiannual Contract Rate, 4.9851% Semiannual Market Rate (A) (B) (C) (D) Cash Bond Semiannual Interest Interest Premium Unamortized Interest Paid Expense Amortization Premium Period-End 6% $100,000 4.985% x Prior (E) (A) (B) Prior (D)-(C) (0) 12/31/2019 $3,600 (1) 6/30/2020 $ 6,000 $5,165 $ 835 2,765 (2) 12/31/2020 6,000 5.123 877 1.888 (3) 6/30/2021 6.000 5,079 921 967 (4) 12/31/2021 6,000 5,033 967 0 $24,000 $20,400 $3,600 Carrying Value $100,000+ (D) $103,600 102,765 101.888 100,967 100,000 Column (A) is the par value ($100,000) multiplied by the semiannual contract rate (6%). Column (B) is the prior period's carrying value multiplied by the semiannual market rate (4.9851%). Column (C) is the difference between interest paid and bond interest expense, or (A) - (B)]. Column (D) is the prior period's unamortized premium less the current period's premium amortization. Column (E) is the par value plus unamortized premium, or ($100.000 + (D)). $103,600 $102.765 $101,888 $100,967 Carrying value $100,000 12/31/2019 6/30/2020 12/31/2020 6/30/2021 12/31/2021 Bonds Payable