Question
The following information is taken from Porters balance sheet at December 31, 2016. Current liabilities Interest payable $ 88,000 Long-term liabilities Bonds payable (4%, due
The following information is taken from Porters balance sheet at December 31, 2016.
| Current liabilities | ||||
| Interest payable | $ 88,000 | |||
| Long-term liabilities | ||||
| Bonds payable (4%, due January 1, 2027) | $3,120,000 | |||
| Less: Discount on bonds payable | 31,200 | 3,088,800 |
Interest is payable annually on January 1. The bonds are callable on any annual interest date. Porters uses straight-line amortization for any bond premium or discount. From December 31, 2016, the bonds will be outstanding for an additional 10 years (120 months).
| (a) | Journalize the payment of bond interest on January 1, 2017. | |
| (b) | Prepare the entry to amortize bond discount and to accrue the interest on December 31, 2017. | |
| (c) | Assume on January 1, 2018, after paying interest, that Porters calls bonds having a face value of $520,000. The call price is 102. Record the redemption of the bonds. | |
| (d) | Prepare the adjusting entry at December 31, 2018, to amortize bond discount and to accrue interest on the remaining bonds |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Accounting And Finance For Your Small Business
Authors: Eric James Burton, Steven M Bragg
1st Edition
9780471323600
