Question: Ellis Company issues 8.0%, five-year bonds dated January 1, 2021, with a $600,000 par value. The bonds pay interest on June 30 and December 31

Ellis Company issues 8.0%, five-year bonds dated January 1, 2021, with a $600,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $612,307. The annual market rate is 7.5% on the issue date. Required: 1. Compute the total bond interest expense over the bonds' life. 2. Prepare an effective interest amortization table for the bonds' life. 3. Prepare the journal entries to record the first two interest payments.

Semiannual Interest Period-End Cash Interest Paid Bond Interest Expense Premium Amortization Unamortized Premium Carrying Value
01/01/2021 $612,307
06/30/2021 $24,000
12/31/2021 24,000
06/30/2022
12/31/2022
06/30/2023
12/31/2023
06/30/2024
12/31/2024
06/30/2025
12/31/2025
Total
  • 1 June 30, 2021 Bond interest expense
    Premium on bonds payable
    Cash 24,000
    2 December 31, 2021 Bond interest expense
    Premium on bonds payable
    Cash 24,000

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