The following is taken from Bermuda Corp. balance sheet at December 31, 1996:

Interest is payable semiannually on January 1 and July 1. The bonds are callable on any semiannual interest date. Bermuda uses straight-line amortization for any bond premium or discount. From December 31, 1996, the bonds will be outstanding for an additional 10 years or 120 months. Assume no interest is accrued on June 30.
\section*{Instructions}
(Round all computations to the nearest dollar.)

(a) Journalize the payment of bond interest on January 1, 1997.

(b) Prepare the entry to amortize bond discount and to pay the interest due on July 1, 1997.

(c) Assume on July 1, 1997, after paying interest that Bermuda Corp. calls bonds having a face value of \(\$ 800,000\). The call price is 102 . Record the redemption of the bonds.

(d) Prepare the adjusting entry at December 31, 1997, to amortize bond discount and to accrue interest on the remaining bonds.

Transcribed Image Text:

Current liabilities Bond interest payable (for 6 months from July 1 to December 31) Long-term liabilities Bonds payable, 11%, due $132,000 January 1, 2007 $2,400,000 Less: Discount on bonds payable 84,000 $2,316,000