Question 1:

On June 1, 2010, Mordica Corp. issued $2,000,000, 9%, 5-year bonds at face value. The bonds were dated

June 1, 2010, and pay interest semi-annually on June 1 and December 1. Financial statements are prepared

annually on December 31.

Required:

(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, 2010.

(c) Show the balance sheet presentation on December 31, 2010.

(d) Prepare the journal entry to record payment of interest on June 1, 2011, assuming no accrual of interest

from January 1, 2011, to June 1, 2011.

(e) Prepare the journal entry to record payment of interest on December 1, 2011.

(f) Assume that on December 1, 2011, Mordica calls the bonds at 102. Record the redemption of the bonds.