Discount on bonds payable127,451TOrecord discount amortization for the prior and currentуearsBonds payable (P2,100,000 - P2,000,000)Premium on bonds payableTo recognize premium on bonds payable100,000100,000Premium on bonds payable (P100,000 x 6/82) 7,317Interest expense7,317To record premium amortization for the yearRetained earnings (P10,000,000 x 12% x 2/12) 200,000Interest expense200,000To correct interest expense pertaining to year 20x3Interest expense (P12,000,000 x 12% x 2/12) 240,000Accrued interest payable240,000TOrecord accrual of interestPrepare the adjusted balances of the following as of December 31, 20x4:Bonds payableBond discountBond premiumAccrued interest payableTotal Interest expense Case 2During your regular annual audit of Karasung Company for the year ended December 31, 20x4, youobtain thefollowing evidence and data relative to your examination of the bonds payable and relatedaccounts.From your permanent file working papers:Client is authorized to issue 20,000 bonds with par value of P1,000 each. Bonds are dated May 1,20x1, andare due May 1, 2x11. Interest at 12% per annum is due semiannually every May 1 andNovember 1.The December 31, 20x3 balance of P9,500,000 represents proceeds from issuance of 10,000bonds onNovember 2, 20x2.12%, 10-year Bonds Payable12/31/20x3 Balance07/01/20x4 CR9,500,0002,100,00005/01/20x4 CV-12011/01/20x4 Cv-531InterestExpense600,000 07/01/20x4720,00040,000From supporting documents:CRCash receipts entry for issuance of 2,000 bonds for a total of P2,100,000 on July 1,20x4.Trustee's remittance statement attached.Entry recordedCash2,140,000Bonds Payable2,100,000Interest expense40,000CV-120Cash payment to trustee for November 1, 20x3 through April 30, 20x4 interest. Paidcheck totrustee attached.CV-531Cash payment to trustee for May 1, 20x4 through October 31, 20x5 interest. Paidcheck totrustee attached.The following adjusting entries were prepared:Adjusting entriesDiscount on bonds payableBonds payableTo correct the original entry on issuance of 10,000 bonds (P10,000,000 - P9,500,000)500,000500,000Retained earnings (P500,000 x 14/102)Interest expense (P500,000 x 12/102)68,62758,824

NOTE : As per BARTLEBY guidelines, when multiple sub parts of the question are given, then first…

Discount on bonds payable 127,451To record discount amortization for the prior and current years Bonds payable (P2,100,000 - P2,000,000) Premium on bonds payable To recognize premium on bonds payable 100,000 100,000 Premium on bonds payable (P100,000 x 6/82) 7,317 Interest expense 7,317 To record premium amortization for the year Retained earnings (P10,000,000 x 12% x 2/12) 200,000 Interest expense 200,000 To correct interest expense pertaining to year 20x3 Interest expense (P12,000,000 x 12% x 2/12) 240,000 Accrued interest payable 240,000T0 record accrual of interest repare the adjusted balances of the following as of December 31, 20x4: Bonds payable Bond discount Bond premium

Discount on bonds payable 127,451To record discount amortization for the prior and current years Bonds payable (P2,100,000 - P2,000,000) Premium on bonds payable To recognize premium on bonds payable 100,000 100,000 Premium on bonds payable (P100,000 x 6/82) 7,317 Interest expense 7,317 To record premium amortization for the year Retained earnings (P10,000,000 x 12% x 2/12) 200,000 Interest expense 200,000 To correct interest expense pertaining to year 20x3 Interest expense (P12,000,000 x 12% x 2/12) 240,000 Accrued interest payable 240,000T0 record accrual of interest repare the adjusted balances of the following as of December 31, 20x4: Bonds payable Bond discount Bond premium

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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