Legacy issues $740,000 of 7.5%, four-year bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31. They are issued at $680,186 and their market rate is 10% at the issue date.
Prepare the January 1, 2015, journal entry to record the bonds' issuance.
Determine the total bond interest expense to be recognized over the bonds' life.
Prepare a straight-line amortization table for the bonds' first two years.
Prepare the journal entries to record the first two interest payments
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Prepare the January 1, 2015, journal entry to record the bonds' issuance.
Determine the total bond interest expense to be recognized over the bonds' life.
Eight payments of $27,750* | $ | 222,000 |
Par value at maturity | 740,000 | |
Total repaid | 962,000 | |
Less amount borrowed | (680,186) | |
Total bond interest expense | $ | 281,814 |
*Semiannual interest payment, computed as $740,000 × 0.075 × ½ year = $27,750. |
Prepare a straight-line amortization table for the bonds' first two years.
Straight-line amortization table ($59,814 / 8 = $7,477) |
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