Journalize the payment of bond interest on January 1, 2021. b. Prepare the entry to amortize bond premium and to accrue the interest due on December 31, 2021. c. Assume that on January 1, 2022, after paying interest, Colaw calls bonds having a face value of €1,200,000. The call price is 101. Record the redemption of the bonds.
The following is taken from the Colaw SA statement of financial position.
Colaw SA
December 31, 2020
Non-current liabilities
Bonds payable (face value €3,200,000),
7% due January 1, 2031 €3,200,000
Current liabilities Interest payable
(for 12 months from January 1 to December 31) 210,000
Interest is payable annually on January 1. The bonds are callable on any annual interest date. Colaw uses straight-line amortization for any bond premium or discount. From December 31, 2020, the bonds will be outstanding for an additional 10 years (120 months).
Instructions
a. Journalize the payment of bond interest on January 1, 2021.
b. Prepare the entry to amortize bond premium and to accrue the interest due on December 31, 2021.
c. Assume that on January 1, 2022, after paying interest, Colaw calls bonds having a face value of €1,200,000. The call price is 101. Record the redemption of the bonds.
d. Prepare the
Hint:
b. Amortization €20,000
c. Gain €60,000
d. Amortization €12,000
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