On May 1, 2020, Herron Corp. issued $600,000, 9%, 5-year bonds at face value. The bonds were

Question:

On May 1, 2020, Herron Corp. issued $600,000, 9%, 5-year bonds at face value. The bonds were dated May 1, 2020, and pay interest annually on May 1. Financial statements are prepared annually on December 31.

Instructions
a. Prepare the journal entry to record the issuance of the bonds.
b. Prepare the adjusting entry to record the accrual of interest on December 31, 2020.
c. Show the balance sheet presentation on December 31, 2020.
d. Prepare the journal entry to record payment of interest on May 1, 2021.

e. Prepare the adjusting entry to record the accrual of interest on December 31, 2021.
f. Assume that on January 1, 2022, Herron pays the accrued bond interest and calls the bonds. The call price is 102. Record the payment of interest and redemption of the bonds.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...

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