Question

A The following section is taken from Blossom's balance sheet at December 31, 2021.

Current liabilities Interest payable $ 46,000 Long-term liabilities Bonds payable (9%, due January 1, 2025) 560,000
Interest is payable annually on January 1. The bonds are callable on any annual interest date.
(a) Journalize the payment of the bond interest on January 1, 2022.
(b) Assume that on January 1, 2022, after paying interest, Blossom calls bonds having a face value of $155,000. The call price is 110. Record the redemption of the bonds.
(c) Prepare the adjusting entry on December 31, 2022, to accrue the interest on the remaining

Answer 1

Date Account titles and explanation Debit Credit

1-1-21 Bond interest payable $46,000

Cash $46,000

(To record payment of interest)

1-1-21 Bond payable $155,000

Loss on redemption bond $15,500

(155,000/100*10)

Cash $170,500

(To record bond redemption)

31-1-21 Interest expenses $36,450

Bond interest expenses $36,450

(560,000-155,000)*9%

(Adjusting entry to accrue the interest on the remaining)