Question: Ellis issues 6.5%, five-year bonds dated january 1, 2015, with a $250,000 par value. The bonds pay interest on June 30 and December 31 and

Ellis issues 6.5%, five-year bonds dated january 1, 2015, 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.

1. Compute the total bond interest expense over the bond's life

2. Prepare an effective interest amortization table for the bonds life.

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

4. Use the market rate at issuance to compute the present value of the remaining cash flows for these bonds as of December 31, 2017. Compare your answer with the amount shown on the amortization table as the balance for that date (from part 2) and explain your findings.

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