Gomez issues $240,000 of 6%, 15-year bonds dated January 1, 2019, that pay interest semiannually on June 30 and December 31. They are issued at $198,494 when the market rate is 8%. Required 1. Prepare the January 1 journal entry to record the bonds’ issuance. 2. Determine the total bond interest expense to be recognized over the life of the bonds. 3. Prepare a straight-line amortization tablefor the bonds’ first two years. 4. Prepare the journal entries to record the first two interest payments. Analysis Component 5. Assume the market rate at issuance is 4% instead of 8%. Without providing numbers, describe how this change affects the amounts reported on Gomez’s financial statements.
Gomez issues $240,000 of 6%, 15-year bonds dated January 1, 2019, that pay interest semiannually on
June 30 and December 31. They are issued at $198,494 when the market rate is 8%.
Required
1. Prepare the January 1
2. Determine the total bond interest expense to be recognized over the life of the bonds.
3. Prepare a straight-line amortization tablefor the bonds’ first two years.
4. Prepare the journal entries to record the first two interest payments.
Analysis Component
5. Assume the market rate at issuance is 4% instead of 8%. Without providing numbers, describe how
this change affects the amounts reported on Gomez’s financial statements.
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