Response to the following problem:
Selected accounts from the trial balances of Mountbatten Corp. at December 31 are presented below:
|
Debits
|
Adjusted
|
Unadjusted
|
|
2015
|
2016
|
2017
|
|
Interest Expense
|
$39,750
|
579,500
|
$59,625
|
|
Discount on Bonds
|
51,000
|
39,000
|
30,000
|
|
Credits
|
|
|
|
|
Bond Interest Payable
|
16,875
|
16,875
|
-0-
|
|
9% Bonds Payable
|
750,000
|
750,000
|
750,000
|
The bonds were authorized on April 1, 2015 but not issued until July 1, 2015. Interest is paid semi-annually on April 1 and October 1. Straightline amortization is used.
Required:
1. Compute the following: a. original issue price as of July 1, 2015 b. maturity date.
2. Reconstruct the journal entry to record the issuance of the bonds on July 1, 2015.
3. Prepare any required adjusting entries as of December 31, 2017.
Assume that straight-line amortization is recorded at year-end and also each time interest is paid..