Reference no: EM132724303
Problem - Brooks Inc.'s fiscal year ends December 31. Selected transactions for the period 20-1 through 20-8 involving bonds payable issued by Brooks are as follows:
20-1
Nov. 30 Issued $800,000 of 10-year, 9%, callable bonds dated November 30, 20-1, for $776,000. Interest is payable semiannually on November 30 and May 31. The bond indenture provides that Brooks is to pay to the trustee bank $30,000 by June 15 of each year (except the tenth year) as a sinking fund for the retirement of the bonds on call or at maturity.
Dec. 31 Made the adjusting entry for interest payable and amortized one month's discount on the bonds (straight-line method).
20-2
Jan. 2 Reversed the adjusting entry for interest payable and bond discount amortization.
May 31 Paid the semiannual interest on the bonds and amortized six months' discount.
June 15 Paid the sinking fund trustee $30,000.
Nov. 30 Paid the semiannual interest on the bonds and amortized six months' discount.
Dec. 31 Made the adjusting entry for interest payable and amortized one month's discount on the bonds.
31 Sinking fund earnings for the year were $1,100.
20-8
June 15 Paid the sinking fund trustee $30,000.
Nov. 30 Paid the semiannual interest on the bonds and amortized six months' discount.
30 Redeemed the bonds, which were called at 102.
The balance in the bond discount account is $7,200 after the payment of interest and amortization of discount have been entered. The cash balance in the sinking fund is $320,000. The sinking fund trustee is paid the additional cash needed to redeem the bonds. ( Hint: First make the entry for payment to the sinking fund, then make the entry for redemption of the bonds.)
Required - Prepare the bonds payable section of a partial balance sheet as of December 31, 20-2.
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