*P11-10A The following is taken from the Pinkston Company balance sheet.
PINKSTON COMPANY
Balance Sheet (partial)
December 31, 2008
Current liabilities
Bond interest payable (for 6 months
from July 1 to December 31) $ 105,000
Long-term liabilities
Bonds payable, 7% due January 1, 2019 $3,000,000
Add: Premium on bonds payable 200,000 $3,200,000
Interest is payable semiannually on January 1 and July 1.The bonds are callable on any semiannual interest date. Pinkston uses straight-line amortization for any bond premium or discount. From December 31, 2008, the bonds will be outstanding for an additional 10 years
(120 months).
Instructions
(a) Journalize the payment of bond interest on January 1, 2009.
(b) Prepare the entry to amortize bond premium and to pay the interest due on July 1, 2009, assuming no accrual of interest on June 30.
(c) Assume that on July 1, 2009, after paying interest, Pinkston Company calls bonds having a
face value of $1,200,000. The call price is 101. Record the redemption of the bonds.
(d) Prepare the adjusting entry at December 31, 2009, to amortize bond premium and to accrue
interest on the remaining bonds.
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