Effective Interest amortization of bond premium; retiring bonds
Heathrow issues $2,400,000 of 9%, 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 $2,073,868.
1.Prepare the January 1, 2011, journal entry to record the bonds' issuance.
2(a)For each semiannual period, compute the cash payment.
2(b)For each semiannual period, compute the straight-line discount amortization.
2(c)For each semiannual period, compute the bond interest expense.
3.Determine the total bond interest expense to be recognized over the bonds' life.
4.Prepare the first two years of an amortization table using the straight-line method.
5.Prepare the journal entries to record the first two interest payments.
