Chapter 10, Problem 10.9BP

(a) (1)

To determine

Bonds

Bonds are a kind of interest bearing notes payable, usually issued by companies, universities and governmental organizations. It is a debt instrument used for the purpose of raising fund of the corporations or governmental agencies. If selling price of the bond is equal to its face value, it is called as par on bond. If selling price of the bond is lesser than the face value, it is known as discount on bond. If selling price of the bond is greater than the face value, it is known as premium on bond.

Straight-line amortization bond

Straight line method of amortization is a process of amortizing premium on bond or discount on bond, which allocates the same amount of interest expense in each period of interest payment.

To Prepare: The journal entry to record the payment of bond interest on January 1, 2016.

(b)

To determine

To Prepare: The journal entry to amortize the bond discount and to pay the interest due on July 1, 2016, assume that interest expense were not accrued and recorded on June 30.

(c)

To determine

To Prepare: The journal entry to record the redemption of one-third of the bond, whose face value is $800,000 at a call price of 102.

(d)

To determine

To Prepare: The journal entry to amortize the bond discount and to pay the interest due on December 31, 2016 for the remaining bonds.