*P11-9B The following is taken from the Magana Corp. balance sheet.

Price: $3.99


*P11-9B The following is taken from the Magana Corp. balance sheet.


MAGANA CORPORATION
Balance Sheet (partial)
December 31, 2008
Current liabilities
Bond interest payable (for 6 months
from July 1 to December 31) $ 84,000
Long-term liabilities
Bonds payable, 7%, due
January 1, 2019 $2,400,000
Less: Discount on bonds payable 90,000 $2,310,000

Interest is payable semiannually on January 1 and July 1. The bonds are callable on any semiannual interest date. Magana 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
(Round all computations to the nearest dollar).

(a) Journalize the payment of bond interest on January 1, 2009.

(b) Prepare the entry to amortize bond discount and to pay the interest due on July 1, 2009, assuming
that interest was not accrued on June 30.

(c) Assume that on July 1, 2009, after paying interest, Magana Corp. calls bonds having a face
value of $800,000.The call price is 101. Record the redemption of the bonds.

(d) Prepare the adjusting entry at December 31, 2009, to amortize bond discount and to accrue
interest on the remaining bonds.