Question

A)

The following information is taken from Concord Corp's balance sheet at December 31, 2016. Current liabilities $94,500 Interest payable Long-term liabilities Bonds payable (4%, due January 1, 2027) $4,680,000 Less: Discount on bonds payable 46,800 4,633.200 Interest is payable annually on January 1. The bonds are callable on any annual interest date. Concord uses straight-l ine 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 Concord Corp. calls bonds having a face value of $780,000. The call price is 102. Record the redemption of the bonds. Prepare the adjusting entry at December 31, 2018, to amortize bond discount and to accrue interest on the remaining bonds. (d) (Credit account titles are automatically indented when amount is en tered. Do not indent manually.) Account Titles and Explanation No. Debit Credit Date (a) Jan. 12017 Interest Payable 94500 Cash 94500 (b) Dec. 31 2017 Interest Expense Discount on Bonds Payable 4680 Interest Payable (c) Jan. 1 2018 Bonds Payable 780000 Cash 795600 (d) Dec. 31 2018 Interest Expense 159900 Discount on Bonds Payable 3900 Interest Payable 156000

B)

C)

D)

E)

Answer 1

Answer to Question A: No. Credit Debit 94,500 Date Jan 1, 2017 Dec 31, 2017 94,500 191,880 4,680 187,200 Jan 1, 2018 Account Titles and Explanation Interest Payable Cash Interest Expense Discount on Bonds Payable ($46,800 / 10) Interest Payable ($4,680,000 * 4%) Bonds Payable Loss on Bonds Redemption Discount on Bonds Payable Cash ($780,000 * 102%) Interest Expense Discount on Bonds Payable Interest Payable 780,000 22,620 7,020 795,600 159,900 Dec 31, 2018 3,900 156,000

Calculation:
Unamortized Discount on Bonds Payable, December 31, 2016 = $46,800
Discount Amortized in the year 2017 = $4,680
Unamortized Discount on Bonds Payable, December 31, 2017 = $46,800 - $4,680 = $42,120

Unamortized Discount on Bonds Payable pertaining to Bonds redeemed = $42,120 / $4,680,000 * $780,000
Unamortized Discount on Bonds Payable pertaining to Bonds redeemed = $7,020