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P10.4A (LO 3, 4), AP On October 1, 2021, Kristal Corp. issued $700,000, 5%, 10-year bonds...

P10.4A (LO 3, 4), AP On October 1, 2021, Kristal Corp. issued $700,000, 5%, 10-year bonds at face value. The bonds were dated

P10.4A (LO 3, 4), AP On October 1, 2021, Kristal Corp. issued $700,000, 5%, 10-year bonds at face value. The bonds were dated October 1, 2021, and pay interest annually on October 1. Financial statements are prepared annually on December 31,
Instructions
a. Prepare the journal entry to record the issuance of the bonds.
b. Prepare the adjusting entry to record the accrual of interest on December 31, 2021.
c. Show the balance sheet presentation of bonds payable and bond interest payable on December 31, 2021.
d. Prepare the journal entry to record the payment of interest on October 1, 2022.
e. Prepare the adjusting entry to record the accrual of interest on December 31, 2022.
f. Assume that on January 1, 2023, Kristal pays the accrued bond interest and calls the bonds. The call price is 104. Record the payment of interest and redemption of the bonds.

Solutions

Expert Solution

a.

Date Account Titles Debit Credit
Oct-01 Cash $        700,000
2021       Bonds Payable     $     700,000

b.

Date Account Titles Debit Credit
Dec-31 Interest Expense $            8,750
2021       Interest Payable     $         8,750

c.

Liabilities
Current Liabilities
      Interest Payable $            8,750
Non-Current Liabilities
      Bonds Payable $        700,000

d.

Date Account Titles Debit Credit
Oct-01 Interest Expense $          26,250
2022 Interest Payable $            8,750
       Cash     $       35,000

e.

Date Account Titles Debit Credit
Dec-31 Interest Expense $            8,750
2022       Interest Payable     $         8,750

f.

Date Account Titles Debit Credit
Jan-01 Interest Payable $            8,750
2023        Cash     $         8,750
   
Jan-01 Bonds Payable $        700,000
2023 Loss on Retirement of Bonds $          28,000
       Cash     $     728,000

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ekkarill92 answered 2 years ago
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