On January 1, 2024, Chilton Ltd. issued $500,000 of 5%, 5-year bonds. The bonds were issued to yield a market interest rate of 6%. Chilton’s year end is December 31. On January 1, 2026, immediately after making and recording the semi-annual interest payment, Chilton redeemed the bonds. A partial bond amortization schedule is presented below. 

Instructions 

a. Prepare the journal entry to record the payment of interest on July 1, 2024.

b. Prepare the journal entry to accrue the interest expense on December 31, 2024. 

c. Prepare the journal entry to record the payment of interest on January 1, 2025. 

d. Prepare the journal entry to record the redemption of the bonds assuming they were redeemed at 100 on January 1, 2026, after payment of interest. 

e. Prepare the journal entry to record the redemption of the bonds on January 1, 2026, assuming they were redeemed at 96.

Transcribed Image Text:

Semi-Annual Interest Period Jan. 1, 2024 July 1, 2024 Jan. 1, 2025 July 1, 2025 Jan. 1, 2026 Interest Interest Payment Expense $12,500 $14,360 12,500 14,416 12,500 14,474 12,500 14,533 Amortization $1,860 1,916 1,974 2,033 Carrying Amount of Bonds $478,674 480,534 482,450 484,424 486,457