Ellis Company issues 6.5%, five-year bonds dated January 1, 2018, with a $250,000 par value. The bonds
Question:
Ellis Company 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.
Required
1. Calculate the total bond interest expense over the bonds? life.
2. Prepare a straight-line amortization table like Exhibit 10.11 for the bonds? life.
3. Prepare the journal entries to record the first two interest payments.
Exhibit 10.11 Straight-Line Amortization of Bond Premium Carrying Value Semiannual Unamortized Period-End Premium" (0) 12/31/2018 $3,600 $103,600 (1) 6/30/2019 (2) 12/31/2019 2,700 102,700 101,800 1,800 900 (3) 6/30/2020 (4) 12/31/2020 100,900 During the bond life, carrying value is adjusted to par and the amortized premium to zero. 100,000 * Total bond premium of $3,600 less accumulated periodic amortization of $900 per semiannual intere st period. * Bond par value of $100,000 plus unamortized premium.
Step by Step Answer:
Part 1 Ten payments of 8125 81250 Par value at maturity 250000 Total repaid 331250 Less amo...View the full answer
Financial Accounting Information for Decisions
ISBN: 978-1259917042
9th edition
Authors: John J. Wild
Related Video
A journal entry is an act of keeping or making records of any transactions either economic or non-economic. Transactions are listed in an accounting journal that shows a company\'s debit and credit balances. The journal entry can consist of several recordings, each of which is either a debit or a credit
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