During two consecutive years, the Eng Medical Clinic com¬

pleted the following transactions relating to its $9,000,000 issue of 30-year, 8 percent bonds, dated April 1. Interest is payable on April 1 and October 1. The corporation’s fiscal year extends from January 1 through December 31.

Instructions 1. Record the transactions in general journal form.
2. Post entries to the Interest Expense account and the Discount on Bonds Pay¬
able account. Label the adjusting, closing, and reversing entries.
Check Figure Year 2 adjustment, credit to Dis¬
count on Bonds Payable, $9,000

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Dec. 31 Year 1 Apr. 1 Sold the bond issue at 97. Oct. 1 31 Deposited $79,500 in a bond sinking fund. Paid semiannual interest on bonds. Made adjusting entry to record accrued interest payable. 31 31 Made adjusting entry to record amortization of bond discount. Closed Interest Expense account. Year 2 Jan. 1 Reversed adjusting entry for accrued interest payable. 4 Apr. 1 Oct. 1 Bought various securities with sinking fund cash; cost, $73,940. Paid semiannual interest on bonds. Paid semiannual interest on bonds. Dec. 31 Recorded receipt of $6,172 of income derived from sinking fund investments, depositing the cash in the sinking fund. 31 Deposited $110,600 in bond sinking fund. 31 Made adjusting entry to record accrued interest payable. 31 Made adjusting entry to record amortization of bond discount. 31 Closed the Sinking Fund Income account. 31 Closed Interest Expense account.