Answer:
1) Determine the total bond interest expense to be recognized.
Total bond interest expense over life of bonds:
Amount repaid:
8 payments of $24,225: $193,800
Par value at maturity: $570,000
Total repaid: $763800 (193,800 + 570,000)
Less amount borrowed: $508050
Total bond interest expense: $255750 (763800 - 508,050)
2)Prepare a straight-line amortization table for the bonds' first two years.
Semiannual Interest Period End; Unamortized Discount; Carrying Value
01/01/2019 61,950 508,050
06/30/2019 54,206 515,794
12/31/2019 46,462 523,538
06/30/2020 38,718 531,282
12/31/2020 30,974 539,026
3) Record the interest payment and amortization on June 30:
June 30 Bond interest expense, dr 31969
Discount on bonds payable, Cr (61950/8) 7743.75
Cash, Cr ( 570000*8.5%/2) 24225
4) Record the interest payment and amortization on December 31:
Dec 31 Bond interest expense, Dr 31969
Discount on bonds payable, Cr 7744
Cash, Cr 24225
