View the step-by-step solution to:

Problem 14-3A Straight-line amortization of bond premium L.

Problem 14-3A Straight-line amortization of bond premium L.O. P1, P3


Heathrow issues $2,800,000 of 8%, 15-year bonds dated January 1, 2011, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $3,427,190.

Required:
1. Prepare the January 1, 2011, journal entry to record the bonds’ issuance. (Omit the "$" sign in your response.)



Date General Journal Debit Credit
Jan. 1


2(a) For each semiannual period, compute the cash payment. (Do not round your intermediate calculations. Omit the "$" sign in your response.)

Cash payment $ ______

2(b) For each semiannual period, compute the the straight-line premium amortization. (Round your final answer to the nearest dollar amount. Omit the "$" sign in your response.)


Amount of premium amortized $ _______


2(c) For each semiannual period, compute the the bond interest expense. (Round your intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

Bond interest expense $ ______


3. Determine the total bond interest expense to be recognized over the bonds' life. (Do not round your intermediate calculations. Omit the "$" sign in your response.)

Total bond interest expense $ _________

4. Prepare the first two years of an amortization table using the straight-line method. (Round your intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.)


Semiannual
Period-End Unamortized Premium CarryingValue
1/01/2011 $ _________ $_________
6/30/2011 _________ __________
12/31/2011 _________ __________
6/30/2012 _________ __________
12/31/2012 _________ __________


5. Prepare the journal entries to record the first two interest payments. (Round your intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

Date General Journal Debit Credit
June 30 ______________
______________
__________

Dec. 31 ______________
______________
___________




Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question