Ellis Company issues 8.0%, five-year bonds dated January 1, 2021, with a $530,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $575,210. The annual market rate is 6% on the issue date. Required: 1. Calculate the total bond interest expense over the bonds' life. 2. Prepare a straight-line amortization table for the bonds' life. 3. Prepare the journal entries to record the first two interest payments. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Calculate the total bond interest expense over the bonds' life.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Ellis Company issues 8.0%, five-year bonds dated January 1, 2021, with a $530,000 par value. The bonds pay interest on June 30 and
December 31 and are issued at a price of $575,210. The annual market rate is 6% on the issue date.
Required:
1. Calculate the total bond interest expense over the bonds' life.
2. Prepare a straight-line amortization table for the bonds' life.
3. Prepare the journal entries to record the first two interest payments.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3
Calculate the total bond interest expense over the bonds' life.
Total bond interest expense over life of bonds:
Amount repaid:
payments of
Par value at maturity
Total repaid
Less amount borrowed
Total bond interest expense
Transcribed Image Text:Ellis Company issues 8.0%, five-year bonds dated January 1, 2021, with a $530,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $575,210. The annual market rate is 6% on the issue date. Required: 1. Calculate the total bond interest expense over the bonds' life. 2. Prepare a straight-line amortization table for the bonds' life. 3. Prepare the journal entries to record the first two interest payments. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Calculate the total bond interest expense over the bonds' life. Total bond interest expense over life of bonds: Amount repaid: payments of Par value at maturity Total repaid Less amount borrowed Total bond interest expense
Required 1 Required 2 Required 3
Prepare a straight-line amortization table for the bonds' life. (Round your intermediate and final answers to the nearest whole
dollar.)
Semiannual Interest Unamortized
Premium
Period-End
01/01/2021
06/30/2021
12/31/2021
06/30/2022
12/31/2022
06/30/2023
12/31/2023
06/30/2024
12/31/2024
06/30/2025
12/31/2025
Carrying Value
Transcribed Image Text:Required 1 Required 2 Required 3 Prepare a straight-line amortization table for the bonds' life. (Round your intermediate and final answers to the nearest whole dollar.) Semiannual Interest Unamortized Premium Period-End 01/01/2021 06/30/2021 12/31/2021 06/30/2022 12/31/2022 06/30/2023 12/31/2023 06/30/2024 12/31/2024 06/30/2025 12/31/2025 Carrying Value
Expert Solution
Step 1 Introduction

The question is based on the concept of Financial Accounting.

Bonds and other financial liability are recorded at the fair value using the market rate of interest. The cash flows in form of coupons and maturity value of the bond are discounted in order to calculate the fair value.

Interest on such bonds are charged at the market rate of interest and transferred to the profit and loss account.

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