Prairie Corporation issued $100,000 of 10 year, 6% bonds payable on January 1, 2014 for $92,900, at a time when market interest rates were 7%. Interest is payable semi-annually on June 30 and December 31. On January 1, 2015, 20% of the bonds were redeemed at 101. Prairie has a December 31 year end and uses the effective-interest method in accounting for bonds payable.
Instructions
a. Record the issue of the bonds on January 1, 2014.
b. Record the payment of interest on June 30 and December 31, 2014.
c. Show how the bonds would be reported on Prairie's December 31, 2014 balance sheet.
d. Record the redemption of the bonds on January 1, 2015.

Question

Quizplus · Accepted Answer

The Answer of Prairie Corporation issued $100,000 of 10 year, 6% bonds payable on January 1, 2014 for $92,900, at a time when market interest rates were 7%. Interest is payable semi-annually on June 30 and December 31. On January 1, 2015, 20% of the bonds were redeemed at 101. Prairie has a December 31 year end and uses the effective-interest method in accounting for bonds payable.
Instructions
a. Record the issue of the bonds on January 1, 2014.
b. Record the payment of interest on June 30 and December 31, 2014.
c. Show how the bonds would be reported on Prairie's December 31, 2014 balance sheet.
d. Record the redemption of the bonds on January 1, 2015.

Prairie Corporation Issued $100,000 of 10 Year, 6% Bonds Payable