Answer:
(a) Journalize the payment of the bond interest on January 1, 2022.
Since no accrued interest has been recorded, we must journalize the interest expense.
Dr Interest expense - bonds payable 60,000
Cr Cash 60,000
If the interest expense had been accrued by December 31 (like question C), then the journal entry should have been:
Dr Interest payable- bonds payable 60,000
Cr Cash 60,000
(b) Assume that on January 1, 2022, after paying interest, Carla Vista calls bonds having a face value of $195,000. The call price is 109. Record the redemption of the bonds.
Dr Bonds payable 195,000
Dr Call premium expense 17,550
Cr Cash 212,550
(c) Prepare the adjusting entry on December 31, 2022, to accrue the interest on the remaining bonds.
Dr Interest expense 40,500
Cr Interest payable - bonds payable 40,500
