In an audit of the Mason Corporation as of December 31, 2016, the following situations exist. No entries have been made in the accounting records in relation to these items.

The Mason Corporation has guaranteed the payment of interest on the 10-year, first mortgage bonds of the Night Owl Company, an affiliate. Outstanding bonds of the Night Owl Company amount to $ 2 comma 500 comma 000 with interest payable at 4 % per annum, due June 1 and December 1 of each year. The bonds were issued by the Night Owl Company on December 1, 2014, and all interest payments have been met by that company with the exception of the payment due December 1, 2016. The Mason Corporation states that it will pay the defaulted interest to the bondholders on January 15, 2017.

c. Describe the nature of the adjusting entries or disclosure, if any, you would make for each of these situations. (AICPA adapted.)

Note: I'm having problems remembering how to calculate the interest payments.