The following section is taken from Koster Corp.s balance sheet at December 31, 2011. Current liabilities Interest

Question:

The following section is taken from Koster Corp.’s balance sheet at December 31, 2011.

Current liabilities

Interest payable………………………………….. $ 72,000

Long-term liabilities

Bonds payable, 9%, due January 1, 2016……….1,600,000

Bond interest is payable semiannually on January 1 and July 1. The bonds are callable on any interest date.

Instructions

(a) Journalize the payment of the bond interest on January 1, 2012.

(b) Assume that on January 1, 2012, after paying interest, Koster calls bonds having a face value of $600,000. The call price is 104. Record the redemption of the bonds.

(c) Prepare the entry to record the payment of interest on July 1, 2012, assuming no previous accrual of interest on the remaining bonds.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...