question archive The following information is taken from Concord Corp
The following information is taken from Concord Corp
Subject:AccountingPrice:5.87 Bought7
The following information is taken from Concord Corp.’s balance seat December 31, 2016. Current liabilities Interest payable $ 94,500 Long-term liabilities Bonds payable (4%, due January 1, 2027) $4,680,000 Less: Discount on bonds payable 46,800 4,633,200 Interest is payable annually on January 1. The bonds are callable on any annual interest date. Sarasota uses straight-line amortization for any bond premium or discount. From December 31, 2016, the bonds will be outstanding for an additional 10 years (120 months).
(a) Journalize the payment of bond interest on January 1, 2017.
(b) Prepare the entry to amortize bond discount and to accrue the interest on December 31, 2017.
(c) Assume on January 1, 2018, after paying interest, that Sarasota Corp. calls bonds having a face value of $780,000. The call price is 102. Record the redemption of the bonds.
(d) Prepare the adjusting entry at December 31, 2018, to amortize bond discount and to accrue interest on the remaining bonds.
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Answer:
| Serial | Date | Accounts Titles and explanation | Debit $ | Credit $ |
| a | Jan 1 2017 | Interest Payable | 94500 | |
| Cash | 94500 | |||
| b | Dec 31 2017 | Interest Expense | 187200 | |
| Discount on bonds payable | 4680 | |||
| Interest Payable | 182520 | |||
| (Interest $4680000 * 4% = $187200 & Discount = $46800 / 10 = $4680) | ||||
| c | Jan 1, 2018 | Bonds payable | 780000 | |
| Premium on Bonds calling (780000 * 2%) | 15600 | |||
| Loss on calling of Bonds | 7020 | |||
| Discount on Bonds Payable (42120 * 780000 / 4680000 = $7020) | 7020 | |||
| Cash (780000 * 102%) | 795600 | |||
| (being the redumption of the Bonds amounting $780000) | ||||
| d | Dec 31 2018 | Interest expense | 159900 | |
| Discount on Bonds Payable (42120 - 7020) / 9 | 3900 | |||
| Interest payable | 156000 | |||
| (making due the interest payable on Dec 31 2018 on Bonds payable $3900000) |
