Refer to the bond details in Problem 14-4B.

Required

1. Prepare the January 1 journal entry to record the bonds’ issuance.
2. Determine the total bond interest expense to be recognized over the bonds’ life.
3. Prepare an effective interest amortization table like the one in Exhibit 14B.1 for the bonds’ first two years.
4. Prepare the journal entries to record the first two interest payments.

Exhibit 14B.1

Problem 14-4B

Gomez issues $240,000 of 6%, 15-year bonds dated January 1, 2021, that pay interest semiannually on June 30 and December 31. They are issued at $198,494 when the market rate is 8%.

Required 

1. Prepare the January 1 journal entry to record the bonds’ issuance. 

2. Determine the total bond interest expense to be recognized over the life of the bonds. 

3. Prepare a straight-line amortization table like the one in Exhibit 14.7 for the bonds’ first two years. 

4. Prepare the journal entries to record the first two interest payments.

Exhibit 14.7

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Bonds: $100,000 Par Value, Semiannual Interest Payments, Two-Year Life, 4% Semiannual Contract Rate, 5.0155% Semiannual Market Rate EXHIBIT 14B.1 Effective Interest (A) (B) Bond (C) (D) (E) Amortization of Cash Semiannual Interest Interest Discount Bond Discount Interest Unamortized Carrying Paid Expense 5.0155% x Prlor (E) Amortization Discount Value Period-End 4% x $100,000 (B) – (A) Prior (D)- (C) $100,000- (D) Carrying value (0) 12/31/2021 $100.000 $3,600 $ 96,400 --- - - - $99,033 (1) 6/30/2022 $4,000 $ 4,835 $ 835 2,765 97,235 $98J12 (2) 12/31/2022 397235 $96,400 4,000 4,877 877 1,888 (3) 6/30/2023 98,112 4,000 4,921 921 967 99,033 (4) 12/31/2023 6/30/23 12/31/23 4,000 4,967 967 100,000 $16,000 12/31/21 $19,600 $3,600 Column (A) is the par value ($100,000) multiplied by the semiannual contract rate (4%). Column (B) is the prior period's carrying value multiplied by the semiannual market rate (5.0155%). Column (C) is the difference between interest paid and bond interest expense, or [(B)- (A)]. Column (D) is the prior period's unamortized discount less the current period's discount amortization. Column (E) is the par value less unamortized discount, or [$100,000 - (D)]. 6/30/22 12/31/22