The following information is taken from Oler Corp.’s balance sheet at December 3
ID: 2480896 • Letter: T
Question
The following information is taken from Oler Corp.’s balance sheet at December 31, 2013.
Interest is payable annually on January 1. The bonds are callable on any annual interest date. Oler uses straight-line amortization for any bond premium or discount. From December 31, 2013, the bonds will be outstanding for an additional 10 years (120 months).
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.
Date
Account Titles and Explanation
Debit
Credit
Current liabilities Interest payable $ 89,800 Long-term liabilities Bonds payable (5%, due January 1, 2024) $3,360,000 Less: Discount on bonds payable 33,600 3,326,400Explanation / Answer
01. Jan 2014 Accrued Bond Interest A/c dr $168,000 [3360000*5%] To Bank $168,000 (Being Bond intt paid) P& LA/c Dr $168,000 To Bond Interest A/c $168,000 (Being Intt charged to P & L A/c 31.Dec 2014 P & L A/c $3,360 [33600/10yrs*1yrs] To Discount of Bond Payable $3,360 (Being iscount amortized) P& LA/c Dr $168,000 [3360000*5%] To Accrued Bond Interest A/c $168,000 (Being Intt charged to P & L A/c 01.Jan 2015 Bond Account Dr $560,000 [5600*$100] Premium on redemption A/c $16,800 [5600*$3] To Bank $576,800 [ Being b0nds redeemed] 01.Jan 2015 P & L A/c Dr 5040 [33600/10yr*9yr]*5600bonds/33660bonds To Discount of Bond Payable 5040 (Being discount on issue chared to P & Lfor 5600 bonds of remaining period 31.Dec 2015 P & L A/c $2,800 [33600-3360-5040]/9yrs To Discount of Bond Payable $2,800 (Being iscount amortized) P& LA/c Dr $140,000 [(3360000-560000)*5% To Accrued Bond Interest A/c $140,000 (Being Intt charged to P & L A/c
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