Problem 10-10A

The following is taken from the Colaw Company balance sheet.

COLAW COMPANY Balance Sheet (partial) December 31, 2015 Current Liabilities Interest payable (for 6 months from July 1 to December 31) $123,705 Long-term Liabilities Bonds payable, 9% due January 1, 2026 $2,749,000 Add: Premium on bonds payable 212,500 $2,961,500

Interest is payable semiannually on January 1 and July 1. The bonds are callable on any semiannual interest date. Colaw uses straight-line amortization for any bond premium or discount. From December 31, 2015, the bonds will be outstanding for an additional 10 years (120 months).

Journalize the payment of bond interest on January 1, 2016. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date Account Titles and Explanation Debit Credit Jan. 1, 2016

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Prepare the entry to amortize bond premium and to pay the interest due on July 1, 2016, assuming no accrual of interest on June 30. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date Account Titles and Explanation Debit Credit July 1, 2016

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Assume that on July 1, 2016, after paying interest, Colaw Company calls bonds having a face value of $1,099,600. The call price is 104. Record the redemption of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date Account Titles and Explanation Debit Credit July 1, 2016

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Prepare the adjusting entry at December 31, 2016, to amortize bond premium and to accrue interest on the remaining bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date Account Titles and Explanation Debit Credit Dec. 31, 2016

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