**Ellis Company Bond Issuance Analysis**Ellis Company issues 6.5%, five-year bonds dated January 1, 2020, with a $500,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $510,666. The annual market rate is 6% 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.**Computation of the Total Bond Interest Expense Over the Bonds' Life:**- **Total Bond Interest Expense Over Life of Bonds:** - **Amount Repaid:** - 10 payments of $16,250 each, totaling $162,500. - Par value at maturity: $500,000. - **Total Repaid:** - $662,500 - **Less Amount Borrowed:** - $510,666 - **Total Bond Interest Expense:** - $151,834This analysis provides a detailed breakdown of the bond interest expense methodology, establishing groundwork for further financial and accounting procedures. The tables and calculations are essential for proper financial management and planning. **Ellis Company Bond Issuance Analysis**Ellis Company issues 6.5%, five-year bonds dated January 1, 2020, with a $500,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $510,666. The annual market rate is 6% on the issue date.**Required Tasks:**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.### Effective Interest Amortization Table**Semiannual Period-End**| Date | Cash Interest Paid | Bond Interest Expense | Premium Amortization | Unamortized Premium | Carrying Value ||--------------|--------------------|-----------------------|----------------------|---------------------|----------------|| 01/01/2020 | | | | $10,666 | $510,666 || 06/30/2020 | $16,250 | | | | || 12/31/2020 | 16,250 | | | | || 06/30/2021 | | | | | || 12/31/2021 | | | | | || 06/30/2022 | | | | | || 12/31/2022 | | | | | || 06/30/2023 | | | | | || 12/31/2023 | | | | | || 06/30/2024 | | | | | || 12/31/2024 | | | | | |**Notes:**- Cash Interest Paid is consistent at $16,250 per semiannual period.- The Unamortized Premium begins at $10,666 and decreases over time.- The Carrying Value starts at $510,666 and will adjust with each period's amortization.This table is used to organize and calculate the reductions in the premium and changes in the carrying value of the bonds

Since the interest is paid semi-annually, therefore the total payments, in this case, the number of…

Ellis Company issues 6.5%, five-year bonds dated January 1, 2020, with a $500,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $510,666. The annual market rate is 6% 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.

Ellis Company issues 6.5%, five-year bonds dated January 1, 2020, with a $500,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $510,666. The annual market rate is 6% 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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