Ellis Company issues 6.5%, five-year bonds dated January 1, 2021, with a $250,000 par value. The bonds
Question:
Ellis Company issues 6.5%, five-year bonds dated January 1, 2021, 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 14.11 for the bonds’ life.
3. Prepare the journal entries to record the first two interest payments.
Exhibit 14.11
EXHIBIT 14.11 Semiannual Unamortized Carrying Period-End Premium Value Straight-Line Amortization of Bond Premium (0) 12/31/2021 ... $3,600 $103,600 (1) 6/30/2022 ... 2,700 102,700 (2) 12/31/2022 ... 1,800 101,800 (3) 6/30/2023 ... 900 100,900 During the bond life, carrying value is adjusted to par and the amortized (4) 12/31/2023 ... 100,000 -premium to zero.
Step by Step Answer:
1 Interest Expense of the Bond Cash Paid 65122500008125 Amount Paid in bond life 81251...View the full answer
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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