The following section is taken from Budke Corp.’s balance sheet at December 31, 2010.
|
Current liabilities |
|
|
Bond interest payable |
$ 72,000 |
|
Long term liabilities |
|
|
Bonds payable, 9%, due January 1, 2015 |
1,600,000 |
Interest is payable semiannually on January 1 and July 1.The bonds are callable on any interest date.
Instructions
(a) Journalize the payment of the bond interest on January 1, 2011.
(b) Assume that on January 1, 2011, after paying interest, Budke calls bonds having a face value of $600,000.The call price is 104. Record the redemption of the bonds.
(c) Prepare the entry to record the payment of interest on July 1, 2011, assuming no previous accrual of interest on the remaining bonds.