The following information is taken from Flounder Corps balan

The following information is taken from Flounder Corp.’s balance sheet at December 31, 2016.

Interest is payable annually on January 1. The bonds are callable on any annual interest date. Flounder uses straight-line amortization for any bond premium or discount. From December 31, 2016, the bonds will be outstanding for an additional 10 years (120 months).

Prepare the adjusting entry at December 31, 2018, to amortize bond discount and to accrue interest on the remaining bonds.

Current liabilities
Interest payable				$ 88,500
Long-term liabilities
Bonds payable (7%, due January 1, 2027)		$3,240,000
Less: Discount on bonds payable		32,400		3,207,600

The following information is taken from Flounder Corp.\'s balance sheet at December 31, 2016. Current liabilities Interest payable Long-term liabilities 88,500 Bonds payable (796, due January 1, 2027) $3,240,000 Less: Discount on bonds payable 32,400 3,207,600 Interest is payable annually on January 1. The bonds are callable on any annual interest date. Flounder uses straight-line amortization for any bond premium or discount. From December 31, 2016, the bonds will be outstanding for an additional 10 years (120 months) (a) (b) (c) (d) Journalize the payment of bond interest on January 1, 2017 Prepare the entry to amortize bond discount and to accrue the interest on December 31, 2017 Assume on January 1, 2018, after paying interest, that Flounder Corp. calls bonds having a face value of $540,000. The call price is 102. Record the redemption of the bonds. Prepare the adjusting entry at December 31, 2018, to amortize bond discount and to accrue interest on the remaining bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Date Account Titles and Explanation Debit Credit (a) Jan. 1 2017 t Payable 88,500 Cash 88,500 (b) Dec. 31 2017 t Expense 9174 Discount on Bonds Payable 3240 Interest Payable 8850 (c) Jan. 1 2018 Bonds Payable 540,000 Loss on Bond Redemption Discount on Bonds Payable Cash 550800 (d) Dec. 31 2018 t Expense Discount on Bonds Payable t Payable

Solution

No. Date Account Titles and Explanation Debit Credit (a) Jan. 1 2017 Interest payable 88500 Cash 88500 (b) Dec. 31 2017 Interest expense 230040 Discount on bonds payable ($32400/10) 3240 Interest payable ($3240000 x 7%) 226800 (c) Jan. 1 2018 Bonds payable 540000 Loss on bond redemption 15660 Discount on bonds payable [($32400 - $3240) x $540000/$3240000) 4860 Cash ($540000 x 102/100) 550800 (d) Dec. 31 2018 Interest expense 191700 Discount on bonds payable [($32400 - $3240 - $4860)/9] 2700 Interest payable [($3240000 - $540000) x 7%] 189000