CP 103

On January 1, 2019, the date of bond authorization, Sydney Corp. issued 3year, $200,000, 12per cent bonds at 112. Semiannual interest is payable on June 30 and December 31.

Required: 1. Prepare the journal entries to record the following transactions:

a. The issuance of the bonds

b. The interest payment on June 30, 2019

c. The amortization of the premium on June 30, 2019 (use the straightline method of amortization).

2. Calculate the amount of interest paid in cash during 2019 and the amount of interest expense that will appear in the 2019 income statement. Why are these amounts different?

3. Prepare a partial balance sheet at December 31, 2019 showing how the bonds payable and the premium on bonds should be shown on the balance sheet.

4. Prepare the journal entry on January 1, 2022 when the bonds were called at 106.