On May 1, 2012, Chance Corp. issued $600,000, 9%, 5-year bonds at face value

On May 1, 2012, Chance Corp. issued $600,000, 9%, 5-year bonds at face value. The bonds were dated May 1, 2012, and pay interest semiannually on May 1 and November 1. Financial statements are prepared annually on December 31.

(a) Prepare the journal entry to record the issuance of the bonds.
(b) Prepare the adjusting entry to record the accrual of interest on December 31, 2012.
(c) Show the balance sheet presentation on December 31, 2012.
(d) Prepare the journal entry to record payment of interest on May 1, 2013, assuming no accrual of interest from January 1, 2013, to May 1, 2013.
(e) Prepare the journal entry to record payment of interest on November 1, 2013.
(f) Assume that on November 1, 2013, Chance calls the bonds at 102. Record the redemption of the bonds.

(a) Prepare the journal entry to record the issuance of the bonds.

Cash Debit 600,000
Bonds Payable Credit 600,000

(b) Prepare the adjusting entry to record the accrual of interest on December 31, 2012.

Interest Expense Debit 9,000
Interest Payable Credit ($600,000 x 9% x 2/12)9,000

(c) Show the balance sheet presentation on December 31, 2012.

Current liabilities

Interest Payable 9,000

Long term Liabilities

Bonds Payable 600,000

(d) Prepare the journal entry to record payment of interest on May 1, 2013, assuming no accrual of interest from January 1, 2013, to May 1, 2013.

Interest Expense Debit ($600,000 x 9% x 4/12) 18,000
Interest Payable Debit 9,000
Cash Credit 27,000

(e) Prepare the journal entry to record payment of interest on November 1, 2013.

Interest Expense Debit 27,000
Cash Credit($600,000 x 9% x 1/12) 27,000

(f) Assume that on November 1, 2013, Chance calls the bonds at 102. Record the redemption of the bonds.

Bonds Payable Debit 600,000
Loss on Bond Redemption Debit 12,000
Cash credit ($600,000 x 1.02) 612000