On October 1, 2016, Ayayai Corp. issued $732,000, 8%, 10-year bonds at face valu
ID: 2568732 • Letter: O
Question
On October 1, 2016, Ayayai Corp. issued $732,000, 8%, 10-year bonds at face value. The bonds were dated October 1, 2016, and pay interest annually on October 1. Financial statements are prepared annually on December 31.
Prepare the journal entry to record the issuance of the bonds.
Prepare the adjusting entry to record the accrual of interest on December 31, 2016.
Show the balance sheet presentation of bonds payable and bond interest payable on December 31, 2016.
Prepare the journal entry to record the payment of interest on October 1, 2017.
Prepare the adjusting entry to record the accrual of interest on December 31, 2017.
Assume that on January 1, 2018, Ayayai pays the accrued bond interest and calls the bonds. The call price is 104. Record the payment of interest and redemption of the bonds
On October 1, 2016, Ayayai Corp. issued $732,000, 8%, 10-year bonds at face value. The bonds were dated October 1, 2016, and pay interest annually on October 1. Financial statements are prepared annually on December 31.
Prepare the journal entry to record the issuance of the bonds.
Prepare the adjusting entry to record the accrual of interest on December 31, 2016.
Show the balance sheet presentation of bonds payable and bond interest payable on December 31, 2016.
Prepare the journal entry to record the payment of interest on October 1, 2017.
Prepare the adjusting entry to record the accrual of interest on December 31, 2017.
Assume that on January 1, 2018, Ayayai pays the accrued bond interest and calls the bonds. The call price is 104. Record the payment of interest and redemption of the bonds
Explanation / Answer
Date Accounting titles & Explanations Debit Credit 10/1/2016 Cash 732,000 bonds payable 732,000 12/31/2016 Interest expense 14640 interest payable 14,640 (732000*8%*3/12) Balance sheet presentation (Partial) Current liabilities Interest payable 14,640 long term liabilities Bonds payable 732,000 10/1/2017 interst payable 14,640 interst expense (732000*8%*9/12) 43,920 cash 58,560 12/31/2017 Interest expense 14,640 interest payable 14,640 (732000*8%*3/12) 1/1/2017 interst payable 14,640 cash 14,740 Bonds payable 732,000 Loss on redemption 43,920 cash (732000*1.06) 775920
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