I\'m looking for the solution to this problem. P10-3BOn June 1, 2017, Weller Cor

Question

I'm looking for the solution to this problem.

P10-3BOn June 1, 2017, Weller Corp. issued $3,000,000, 9%, 5-year bonds at face value. The bonds were dated June 1, 2017, and pay interest annually on June 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, 2017. (c) Show the balance sheet presentation on December 31, 2017. (d) Prepare the journal entry to record payment of interest on June 1, 2018. (e) Prepare the adjusting entry to record the accrual of interest on December 31, 2018. (f) Assume that on January 1, 2019, Weller pays the accrued interest and calls the bonds at 102. Record the payment of interest and redemption of the bonds.

Explanation / Answer

(a) Journal entry to record the issuance of the bonds :

Cash Account Dr. $3000000

To 9% Bond $3000000

(Being Weller Corp. issued $3,000,000, 9%, 5-year bonds at face value)

(b) Adjusting entry to record the accrual of interest on December 31, 2017

Interest expenses Account Dr. $157500

To Interest Payable $157500

(Being Interest accured of $157500 {$3000000 * 7/12 * 9%} on 31 Dec,2017)

(c) The balance sheet presentation on December 31, 2017

Weller Corp.

Balance sheet as on 31Dec,2017

Assets $

Profit and loss Account (Loss) 157500 157500

Laibailities $   

9% Bond 3000000

Interets payable 157500   

   3157500

NOTE: Profit and loss Account (Loss) of  $157500 ;

Profit and loss Account Dr. $157500

To Interest expenses $157500

   (Being interest expense tranfer to Profit and loss Account )

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