Question: Issuance of Bonds between Interest Dates Straight Line
(Issuance of Bonds between Interest Dates, Straight-Line, Retirement) Presented below are selected transactions on the books of Simonson Corporation. May 1, 2010 Bonds payable with a par value of $900,000, which are dated January 1, 2010, are sold at 106 plus accrued interest. They are coupon bonds, bear interest at 12% (payable annually at January 1), and mature January 1, 2020. (Use interest expense account for accrued interest.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the amortization of the proper amount of premium. (Use straight-line amortization.) Jan. 1, 2011 Interest on the bonds is paid. April 1 Bonds of par value of $360,000 are called at 102 plus accrued interest, and retired. (Bond premium is to be amortized only at the end of each year.) Dec. 31 Adjusting entries are made to record the accrued interest on the bonds, and the proper amount of premium amortized.
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