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149. A company issued 10%, 5-year bonds with a par value of $2,000,000, on January 1, 2010. Interest is to be paid semiannually each June 30 and December 31. The bonds were sold at $2,162,290 to yield the buyers an 8% annual return. The company uses the effective interest method of amortization. (1) Prepare an amortization table for the first two semiannual payment periods using the format shown below.

seminaual intrest period

cash intrest paid

bond intrest expense

preimum amortization

unamortized preimum

carrying value

(2) Prepare the general journal entry to record the first semiannual interest payment.

semianual intrest period	cash intrest paid	bond intrest expense	preimum amortization	unamortized preimum	carrying value
6/30/10	$100,000	$86,491.60	$13,508.40	$148,781.60	$2,148,781.60
12/31/10	$100,000	$85,951.26	$14,048.74	$134,732.86	$2,134,732.86

6/30/10 Cash payment: $2,000,000 x 10% x year = $100,000.00 Interest expense: $2,162,290 x 8% x year = $86,491.60 Premium amortized: $100,000 - $86,491.60 = $13,508.40 Unamortized premium: ($2,162,290 - $2,000,000) - $13,508.40 = $148,781.60 Carrying value: $2,000,000 + $148,781.60 = $2,148,781.60 12/31/10 Cash payment: $2,000,000 x 10% x year = $100,000.00 Interest expense: $2,148,781.60 x 8% x year = $85,951.26 Premium amortized: $100,000 - $85,951.26 = $14,048.74 Unamortized premium: $148,781.60 - $14,048.74 = $134,732.86 Carrying value: $2,000,000 + $134,732.86 = $2,134,732.86

2)

6/30/10

bond intrest expense..................86,,491.60

premium on bonds payable........13,508.40

cash....................................................................100,000

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