Ike issues $110,000 of 9%, three-year bonds dated January 1, 2017, that pay inte
ID: 2540265 • Letter: I
Question
Ike issues $110,000 of 9%, three-year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. They are issued at $112,881. Their market rate is 8% at the issue date.
Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life.
Prepare an effective interest amortization table for the bonds' first two years.
Prepare the journal entries to record the first two interest payments.
Record the first interest payment on June 30, 2017.
Note: Enter debits before credits.
Record the second interest payment on December 31, 2017.
Note: Enter debits before credits.
Prepare the journal entry to record the bonds' retirement on January 1, 2019, at 98.
Record the retirement of the bonds on January 1, 2019 at 98.
Note: Enter debits before credits.
Total bond interest expense over life of bonds: Amount repaid: payments of Par value at maturity Total repaid 0 Less amount borrowed Total bond interest expense $0Explanation / Answer
Answer
Total bond interest expense over life of bonds:
Amount repaid:
payments of
Par value at maturity
Total repaid
112881
Less amount borrowed
110000
Total bond interest expense
2881
Semiannual Interest Period-End
Cash Interest Paid
Bond Interest Expense
Premium Amortization
Unamortized Premium
Carrying Value
01-01-2017
2881
112881
06/30/2017
4950
4515
435
2446
112446
12/31/2017
4950
4498
452
1994
111994
06/30/2018
4950
4480
470
1524
111524
12/31/2018
4950
4461
489
1035
111035
Date
General Journal
Debit
Credit
Jun 30, 2017
Interest expenses
4515
Unamortised Premium
435
Cash
4950
Date
General Journal
Debit
Credit
Dec 31, 2017
Interest expenses
4498
Unamortised Premium
452
Cash
4950
Date
General Journal
Debit
Credit
Jan 1, 2019
Bonds Payable
110000
Unamortised Premium
1035
Cash
107800
Gain on Redemption of Bond
3235
Total bond interest expense over life of bonds:
Amount repaid:
payments of
Par value at maturity
Total repaid
112881
Less amount borrowed
110000
Total bond interest expense
2881