Problem 15-3A The following section is taken from Mareska’s balance sheet at Dec
ID: 2532859 • Letter: P
Question
Problem 15-3A The following section is taken from Mareska’s balance sheet at December 31, 2017. Current liabilities Interest payable $47,000 Long-term liabilities Bonds payable (7%, due January 1, 2021) 410,000 Interest is payable annually on January 1. The bonds are callable on any annual interest date. Journalize the payment of the bond interest on January 1, 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1, 2018 Link to Text Assume that on January 1, 2018, after paying interest, Mareska calls bonds having a face value of $140,000. The call price is 104. Record the redemption of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 1, 2018 Link to Text Prepare the adjusting entry on December 31, 2018, to accrue the interest on the remaining bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31, 2018 Link to Text
Explanation / Answer
SOLUTION
Date Account titles and Explanation Debit ($) Credit ($) Jan. 1, 2018 Bond Interest Payable 47,000 Cash 47,000 (To record payment of the bond interest ) Jan. 1, 2018 Bonds Payable 140,000 Loss on Bonds Redemption 5,600 Cash ($140,000 * 104%) 145,600 (To record the redemption of the bonds) Dec.31,2018 Bond Interest Expense 18,900 Bond Interest Payable ($410,000 - $140,000)*7% 18,900 (To record the payment of interest)