The following is taken from the Millette Company balance sheet. Prepare entries to record interest payments, straight-line

Question:

The following is taken from the Millette Company balance sheet. Prepare entries to record interest payments, straight-line Millette Company premium amortization, and Balance Sheet (partial) redemption of bonds.

December 31, 2013 (LO 6, 11)

Current liabilities Interest payable (for 6 months from July 1 to December 31) $ 90,000 Long-term liabilities Bonds payable, 6% due January 1, 2024 $3,000,000 Add: Premium on bonds payable 180,000 3,180,000 Interest is payable semiannually on January 1 and July 1. The bonds are callable on any semiannual interest date. Millette uses straight-line amortization for any bond premium or discount. From December 31, 2013, the bonds will be outstanding for an additional 10 years (120 months).

Instructions

(a) Journalize the payment of bond interest on January 1, 2014.

(b) Prepare the entry to amortize bond premium and to pay the interest due on July 1, —_

(b) Amortization $9,000 2014, assuming no accrual of interest on June 30.

(c) Assume that on July 1, 2014, after paying interest, Millette Company calls bonds having —

(c) Gain $56,400 a face value of $1,200,000. The call price is 101. Record the redemption of the bonds.

(d) Prepare the adjusting entry at December 31, 2014, to amortize bond premium and to _

(d) Amortization $5,400 accrue interest on the remaining bonds.

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