Problem 10-9AB Effective Interest: Amortization of bond premium; computing bond price LO P1, P6

Ellis issues 6.5%, five-year bonds dated January 1, 2018, 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. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided.)

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

2. Prepare an effective interest amortization table for the bonds' life.

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, 2020.