Ellis issues 7.0%, five-year bonds dated January 1, 2017, with a$580,000 par value. The bonds pay interest on June 30 and December31 and are issued at a price of $604,738. The annual market rate is6% on the issue date.
Required:
1. Complete the below table to calculate thetotal bond interest expense over the bonds' life.
2. Prepare a straight-line amortization table forthe bonds’ life.
3. Prepare the journal entries to record the firsttwo interest payments.
Complete the below table to calculate the total bond interestexpense over the bonds' life.
| Total bond interest expense over lifeof bonds: | | Amount repaid: | | payments of: | | | | Par value at maturity: | | | Total repaid: | | | Less amount borrowed: | | | Total bond interestexpense: | |
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Prepare a straight-line amortization table for the bonds’life.
| Semiannual Period-End | Unamortized Premium | Carrying Value | | 01/01/2017 | | | | 06/30/2017 | | | | 12/31/2017 | | | | 06/30/2018 | | | | 12/31/2018 | | | | 06/30/2019 | | | | 12/31/2019 | | | | 06/30/2020 | | | | 12/31/2020 | | | | 06/30/2021 | | | | 12/31/2021 | | |
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Prepare the journal entries to record the first two interestpayments.
- Record the first interest payment on June 30, 2017.
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| | Date | General Journal | Debit | Credit |
|---|
| Jun 30, 2017 | | | | | | | | | | | | | | | | | |
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- Record the second interest payment on December 31, 2017.
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| | Date | General Journal | Debit | Credit |
|---|
| Dec 31, 2017 | | | | | | | | | | | | | | | | |
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