Question

The following section is taken from Ivanhoe's balance sheet at December 31, 2021. Current liabilities Interest payable $ 47,500 Long-term liabilities Bonds payable (8%, due January 1, 2025) 575,000 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, Ivanhoe calls bonds having a face value of $170,000. The call price is 106. Record the redemption of the bonds. (c) Prepare the adjusting entry on December 31, 2022, to accrue the interest on the remaining bonds.

Answer 1

Answer and Explanation:

The Journal Entry is shown below:-

1. Bond Interest Payable $47,500

To Cash $47,500

(Being payment of interest on bonds is recorded)

2. Bonds Payable Dr, $170,000

Loss on Redemption of Bonds Dr, $10,200

($180,200 - $170,000)

To Cash $180,200

($170,000 × 106%)

(Being redemption of bonds is recorded)

3. Bond Interest Expense $32,400

($575,000 - $170,000) × 8%

To Bond Interest Payable $32,400

(Being accrue interest on remaining bonds is recorded)