Question

Ellis issues 6.5% five-year bonds dated January 1. 2015, with a $250.000 par value. The bonds interest on June 30 and December 31 and are issued at a price of $255.333. The annual market 6% on the issue date. Calculate the total bond interest expense over the bonds' life. Prepare a straight-line amortization table like Exhibit 10.11 for the bonds life. Prepare the journal entries to record the first two interest payments. Legacy issues $325,000 of 5%, four-year bonds dated January , 2015, that pay interest semiannually on June 30 and December 31. They are issued at $292,181 and their market rate is 8% at the issue date. Prepare the January l. 2015. journal entry to record the bonds' life. Determine the total bond interest expense to be recognized over the bonds life. Prepare a straight-line amortization table like the one in Exhibit 10.7 for the bonds first two years. Prepare the journal entries to record the first two interest payments. Analysis Component Assume the market rate on January 1. 2015. is 4% instead of 8%. Without proving numbers, describe how this change affects the amounts reported on Legacy's financial statements. On November 1. 2015. Norwood borrows $200,000 cash from a bank by a five-year installment note bearing 8% interest. The note requires equal total payments each year on October 31.

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