Question

On October 1, 2021, Culver Corp. issued $936,000, 8%, 10-year bonds at face value. The bonds were dated October 1, 2021, and pay interest annually on October 1. Financial statements are prepared annually on December 31.

Show the balance sheet presentation of bonds payable and bond interest payable on December 31, 2021.

Answer 1

Culver Corp.

Balance Sheet as of December 31, 2021 (Partial)

Current liabilities:

Bond Interest payable $18,720

Long-term liabilities:

8% Bonds Payable $936,000

Step-by-step explanation:

a) Data and Calculations:

8% Bonds Payable = $936,000

Maturity period of bonds = 10 years

Annual interest payable = $74,880 ($936,000 * 8%)

Interest payable for 2021 = $18,720 ($74,880 * 3/12)

b) This shows that interest payable for 2021 is a current liability, which will be offset within a year, while the Bonds payable is a long-term liability with a maturity period of 10 years.