The following is taken from the Colaw SA statement of financial position.

Interest is payable annually on January 1. The bonds are callable on any annual interest date. Colaw uses straight-line amortization for any bond premium or discount. From December 31, 2017, the bonds will be outstanding for an additional 10 years (120 months).
Instructions
(a) Journalize the payment of bond interest on January 1, 2018.
(b) Prepare the entry to amortize bond premium and to accrue the interest due on December
31, 2018.
(c) Assume that on January 1, 2019, after paying interest, Colaw calls bonds having a face value of ‚¬1,200,000. The call price is 101. Record the redemption of the bonds.
(d) Prepare the adjusting entry at December 31, 2019, to amortize bond premium and to accrue interest on the remaining bonds.

Transcribed Image Text:

Statement of Financial Position (partial) December 31, 2017 Non currnt liabilitics Bonds payable (face value 3,000,000), 7% due January 1, 2028 3,200,000 Current liabilities Interest payable (for 12 months from I to December 31) 210,000