Question

Problem 15-8A (Part Level Submission) The following is taken from the Colaw Company balance sheet. COLAW COMPANY Balance Sheet (partial) December 31, 2017 Current Liabilities Interest payable (for 12 months from January 1 to December 31) Long-term Liabilities Bonds payable, 6% due January 1, 2028 Add: Premium on bonds payable $185,400 $3,090,000 249,000 $3,339,000 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). (a) Your answer is correct. Journalize the payment of bond interest on January 1, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Credit Date Account Titles and Explanation Jan. 1, 2018 Interest Payable Debit 185400 Cash 185400 SHOW LIST OF ACCOUNTS SHOW ANSWER LINK TO TEXT (b) Your answer is correct. Prepare the entry to amortize bond premium and to accrue the interest due on December 31, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation Dec 31, 2018 Interest Expense 1605001 Premium on Bonds Payable 24900|| Interest Payable IN 185400 SHOW LIST OF ACCOUNTS SHOW SOLUTION SHOW ANSWER LINK TO TEXT (c) Assume that on January 1, 2019, after paying interest, Colaw Company calls bonds having a face value of $1,236,000. The call price is 101. Record the redemption of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1, 2019

Answer 1

c.

Date	Account Titles and Explanations	Debit	Credit
		$	$
Jan 1, 2019	Bonds Payable	1,236,000
	Premium on Bonds Payable	89,640
	Gain on Redemption of Bonds		77,280
	Cash ( 1,236,000 x 101 % )		1,248,360
	To redemption of bonds payable
Dec 31, 2019	Interest Expense	96,300
	Premium on Bonds Payable	14,940
	Interest Payable		111,240