Reference no: EM131130820
The following is taken from the Nilson Corp. balance sheet.
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Interest is payable semiannually on January 1 and July 1. The bonds are callable on any semiannual interest date. Nilson uses straight-line amortization for any bond premium or discount. From December 31, 2010, the bonds will be outstanding for an additional 10 years (120 months).
Instructions
(Round all computations to the nearest dollar)
(a) Journalize the payment of bond interest on January 1, 2011.
(b) Prepare the entry to amortize bond discount and to pay the interest due on July 1, 2011, assuming that interest was not accrued on June 30.
(c) Assume that on July 1, 2011, after paying interest, Nilson Corp. calls bonds having a face value of $800,000.The call price is 102. Record the redemption of the bonds.
(d) Prepare the adjusting entry at December 31, 2011, to amortize bond discount and to accrue interest on the remainingbonds.
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