May 1, 2014 – Bonds payable with a par value of $900,000, which are dated January 1, 2014 are sold at 106 plus accrued interest. They are coupon bonds, bear interest at 12% (payable annually at January 1), and mature January 1, 2024. (Use interest expense account for accrued interest.)
Dec 31 – Adjusting entries are made to record the accrued interest on the bonds, and the amortization of the proper amount of premium. (Use straight-line amortization.)
Jan. 1, 2015 – Interest on the bonds is paid.
April 1 – Bonds of par value of $360,000 are called at 102 plus accrued interest, and retired. (Bond premium is to be amortized only at the end of each year.)
Dec 31 – Adjusting entries are made to record the accrued interest on the bonds, and the proper amount of premium amortized.
Instructions:
