Reporting Financial Statement Effects of Bond Transactions On January 1, 2016, Shields, Inc., issued $500,000 of 9%, 20 -year bonds for $549,482, yielding a market (yield) rate of 8%. Semiannual interest is payable on June 30 and December 31 of each year.

a. Show computations to confirm the bond issue price.

Round answers to the nearest whole number.

Present value of principal repayment			$Answer
Present value of interest payments			Answer
Selling price of bonds			$Answer

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.

Round answers to the nearest whole number.

General Journal
Date	Description	Debit	Credit
1/1/16	AnswerCashBond premiumBonds payableInterest expense	Answer	Answer
	AnswerCashBond premiumBonds payableInterest expense	Answer	Answer
	Bonds payable	Answer	Answer
6/30/16	Interest expense	Answer	Answer
	AnswerCashBond premiumBonds payableInterest expense	Answer	Answer
	AnswerCashBond premiumBonds payableInterest expense	Answer	Answer
12/31/16	Interest expense	Answer	Answer
	AnswerCashBond premiumBonds payableInterest expense	Answer	Answer
	AnswerCashBond premiumBonds payableInterest expense	Answer	Answer

c. Post the journal entries from part b to their respective T-accounts.

Cash
	Answer	Answer
	Answer	Answer

Bond Premium
	Answer	Answer
	Answer	Answer

Bond Payable
	Answer	Answer

Interest Expense
	Answer	Answer
	Answer	Answer

d. Record each of the transactions from part b in the financial statement effects template.

Use rounded answers from above. When applicable, enter the total amount for liabilities. Use negative signs with answers, when appropriate.

Transaction					Cash Asset		+	Noncash Assets		=	Liabilities		+	Contr. Capital	+	Earned Capital		Revenue	-	Expenses	=	Net income
1/1/16 Issue bonds					$Answer			$Answer			$Answer			$Answer		$Answer		$Answer		$Answer		$Answer
6/30/16 Interest payment on bonds					Answer			Answer			Answer			Answer		Answer		Answer		Answer		Answer
12/31/16 Interest payment on bonds					Answer			Answer			Answer			Answer		Answer		Answer		Answer		Answer