Heathrow issues $2,800,000 of 8 percent, 15-year bonds dated January 1, 2011, that pays interest semiannually on 30th June and 31st December. The bonds are issued at a price of $3,427,190.
Required:
1. Prepare the 1st January, 2011, journal entry to record the bonds' issuance.
Date General Journal Debit Credit
Jan. 1
2(a) For each semiannual period, evaluate cash payment.
Cash payment $ ______
2(b) For every semiannual period, calculate the straight-line premium amortization.
Amount of premium amortized $ _______
2(c) For every semiannual period, compute the bond interest expense.
Bond interest expense $ ______
3. Evaluate the total bond interest expense to be recognized over bonds' life. (Do not round your intermediate calculations. Omit the "tiny_mce_markerquot; sign in your response.)
Total bond interest expense $ _________
4. Prepare first two years of an amortization table using straight-line method. (Round your intermediate calculations and final answers to nearest dollar amount. Omit the "tiny_mce_markerquot; 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. Create journal entries to record the first two interest payments.
Date General Journal Debit Credit
June 30 ______________
______________
__________
Dec. 31 ______________
______________
___________