Question

Your answer is partially correct. Try again. The following information is taken from Ivanhoe Corp.'s balance sheet at December 31, 2021. $ 92,000 Current liabilities Interest payable Long-term liabilities Bonds payable (4%, due January 1, 2032) Less: Discount on bonds payable $2,300,000 23,000 2,277,000 Interest is payable annually on January 1. The bonds are callable on any annual interest date. Ivanhoe uses straight-line amortization for any bond premium or discount. From December 31, 2021, the bonds will be outstanding for an additional 10 years (120 months). (a) (b) (c) (d) Journalize the payment of bond interest on January 1, 2022. Prepare the entry to amortize bond discount and to accrue the interest on December 31, 2022. Assume on January 1, 2023, after paying interest, that Ivanhoe Corp. calls bonds having a face value of $460,000. The call price is 102. Record the redemption of the bonds. Prepare the adjusting entry at December 31, 2023, to amortize bond discount and to accrue interest on the remaining bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Date Account Titles and Explanation Debit Credit (a) Jan. 1 2022 TInterest Payable 000 Cash 92000 (b) Dec. 31 2022 Interest Expense 168360

Answer 1

(a) Journalize the payment of bond interest on January 1, 2022 as shown below: Ref. Credit General Journal Date Account Titles and Explanation Jan. 1 2022 Interest Payable Cash (To record the payment of accrued interest on bond) Debit $92.000 $92.000 (b) Prepare the journal entry to amortize bond discount and to accrue the interest on bond as shown below: Ref. Debit Credit General Journal Date Account Titles and Explanation Dec. 31 2022 Interest Expense ($92.000 + $2.300) Discount on Bonds Payable ($23.000 + 10 years] Interest Payable ($2,300,000 x 4%) (To record the accrual of bond interest) $2.300 $92.000

(c) Prepare the journal entry to record the redemption of the bonds as shown below: Date Date Credit Bonds Payab General Journal Account Titles and Explanation Ref. Jan. 1 2023 Bonds Payable Loss on Bond Redemption ($469.200+ $4.140 - $460,000) Discount on Bonds Payable Note-1) Cash ($460.000 X (102 - 100)) (To record the redemption of bonds) Debit $460.000 $13.340 $4.140 $469.200 Note-1: Determine the discount on bonds payable unamortized on $460,000 face value bonds as shown below: Unamortized discount = Total unamortized discount Face value of bonds redeemed Total face value of bonds = ($23,000 - $2 3001 $460,000 $2,300,000 = $20,700 $460,000 $2,300,000 = $4,140

(d) Prepare the adjusting entry at December 31, 2023 on accrual of interest on bonds as shown below: Ref. Credit Debit $75,440 General Journal Date Account Titles and Explanation Dec. 31 2023 Interest Expense (S73.600 + $ 1.840] Discount on Bonds Payable [($23.000 - $2.300 - $4.140) + 9 years) Interest Payable [($2.300.000 - $460.000) x 4%] (To record the accrual of bond interest) $1.840 $73.600