prepare the adjusting entry at december 31 2013 to amortize bond discount and to acc 581506

The following is taken from the Kijak Corp. balance sheet.

KIJAK CORPORATION

Balance Sheet (partial)

December 31, 2012

Current liabilities

Interest payable (for 6 months

from July 1 to December 31)

$ 108,000

Long term liabilities

Bonds payable, 9%, due

January 1, 2023

$2,400,000

Less: Discount on bonds payable

90,000

2,310,000

Interest is payable semiannually on January 1 and July 1. The bonds are callable on any semiannual interest date. Kijak uses straight line amortization for any bond premium or discount. From December 31, 2012, the bonds will be outstanding for an additional 10 years (120 months).

Instructions

(Round all computations to the nearest dollar).

(a) Journalize the payment of bond interest on January 1, 2013.

(b) Prepare the entry to amortize bond discount and to pay the interest due on July 1, 2013, assuming that interest was not accrued on June 30.

(c) Assume that on July 1, 2013, after paying interest, Kijak Corp. calls bonds having a face value of $800,000. The call price is 102. Record the redemption of the bonds.

(d) Prepare the adjusting entry at December 31, 2013, to amortize bond discount and to accrue interest on the remaining bonds.