On May 1, 2011, Newby Corp. issued
$600,000, 9%, 5-year bonds at face value. The bonds were dated May 1, 2011, and
pay interest semiannually on May 1 and November 1.
Financial statements are prepared
annually on December 31.
Instructions
(a)
Prepare the journal entry to record the
issuance of the bonds.
(b)
Prepare the adjusting entry to record
the accrual of interest on December 31, 2011.
(c)
Show the balance sheet presentation on
December 31, 2011.
(d)
Prepare the journal entry to record
payment of interest on May 1, 2012, assuming no accrual
of interest from January 1, 2012, to
May 1, 2012.
(e)
Prepare the journal entry to record
payment of interest on November 1, 2012.
(f)
Assume that on November 1, 2012, Newby
calls the bonds at 102. Record the redemption of
the bonds.
(a)
2011
May 1 Cash
600,000
Bonds
Payable 600,000
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