Question

On May 1, Steele Recreation Corporation issued $ 4,500,000 worth of 10-year, 8 percent bonds, dated May 1, with interest payable on May 1 and November 1. The corporation’s fiscal year is the calendar year. The following transactions pertain to the bond issue for the first two years:
Year 1
May 1 Sold the bond issue at 102.
Nov. 1 Paid semiannual interest on the bonds.
Dec. 31 Deposited $ 80,250 in a bond sinking fund.
31 Recorded an adjusting entry for amortization of bond premium.
31 Recorded an adjusting entry for accrued interest payable.
31 Closed the Interest Expense account.
Year 2
Jan. 1 Reversed the adjusting entry for accrued interest payable.
12 Bought various securities with sinking fund cash; cost, $ 80,250.
May 1 Paid semiannual interest on the bonds.
July 1 Recorded the receipt of $ 2,907 of income derived from sinking fund investments, depositing the cash in the sinking fund.
2 Bought various securities with sinking fund cash; cost, $ 2,907.
Nov. 1 Paid semiannual interest on the bonds.
Dec. 31 Recorded the receipt of $ 3,249 of income derived from sinking fund investments, depositing the cash in the sinking fund.
31 Deposited $ 101,500 in the bond sinking fund.
31 Recorded an adjusting entry for amortization of bond premium.
31 Recorded an adjusting entry for accrued interest payable.
31 Closed the Sinking Fund Income account.
31 Closed the Interest Expense account.

Required
1. Record the transactions in general journal form using pages 252– 254 of the general journal.
2. Post entries to the Premium on Bonds Payable account, No. 243, and the Interest Expense account, No. 581. Label the appropriate entries in the ledger accounts as adjusting, closing, or reversing.



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  • CreatedOctober 21, 2014
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