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The following section is taken from Majestic's balance ... - JustAnswer

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The following section is taken from Majestic's balance ... - JustAnswer Powered By Docstoc
					The following section is taken from Majestic’s balance sheet at December 31, 2006.
Current liabilities Bond interest payable $ 24,000 Long-term liabilities Bonds payable,
8%, due January 1, 2013 300,000 Interest is payable annually on January 1. The bonds
are callable on any annual interest date. Instructions (a) Journalize the payment of the
bond interest on January 1, 2007. (b) Assume that on January 1, 2007, after paying
interest, Majestic calls bonds having a face value of $50,000. The call price is 104.
Record the redemption of the bonds. (c) Prepare the adjusting entry on December 31,
2007, to accrue the interest on the remaining bonds.


(a)

Jan. 1         Bond Interest Payable .......................... 24,000
                     Cash...................................................   24,000**

(b)

Jan. 1         Bonds Payable ........................................ 50,000
               Loss on Bond Redemption ....................... 2,000
                      Cash ($50,000 X 104%)……………........... 52,000

(c)

Dec. 31        Bond Interest Expense ......................... 20,000
                     Bond Interest Payable...................................... 20,000
                 ($250,000 X 8%)

				
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