Question

On October 1, 2021, Monty Corp. issued $828,000, 7%, 10-year bonds at face value. The bonds were dated October 1, 2021, and pay interest annually on October 1. Financial statements are prepared annually on December 31.

Part 1

Prepare the journal entry to record the issuance of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Oct. 1, 2021	enter an account title for the journal entry on October 1, 2021	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on October 1, 2021	enter a debit amount	enter a credit amount

Part 2

Prepare the adjusting entry to record the accrual of interest on December 31, 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2021	enter an account title for the adjusting entry on December 31, 2021	enter a debit amount	enter a credit amount
	enter an account title for the adjusting entry on December 31, 2021	enter a debit amount	enter a credit amount

Part 3

Show the balance sheet presentation of bonds payable and bond interest payable on December 31, 2021.

MONTY CORP. Balance Sheet (Partial) choose the accounting period                                                                      For the Year Ended December 31, 2021December 31, 2021For the Month Ended December 31, 2021
select an opening name for subsection one                                                                      Current AssetsCurrent LiabilitiesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity
enter a balance sheet item			$enter a dollar amount
select an opening name for subsection two                                                                      Current AssetsCurrent LiabilitiesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesProperty, Plant and EquipmentStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal Stockholders' Equity
enter a balance sheet item			enter a dollar amount

Part 4

Prepare the journal entry to record the payment of interest on October 1, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Oct. 1, 2022	enter an account title for the journal entry on October 1, 2022	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on October 1, 2022	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on October 1, 2022	enter a debit amount	enter a credit amount

Part 5

Prepare the adjusting entry to record the accrual of interest on December 31, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2022	enter an account title for the adjusting entry on December 31, 2022	enter a debit amount	enter a credit amount
	enter an account title for the adjusting entry on December 31, 2022	enter a debit amount	enter a credit amount

Part 6

Assume that on January 1, 2023, Monty pays the accrued bond interest and calls the bonds. The call price is 104. Record the payment of interest and redemption of the bonds. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 1, 2023	enter an account title to record the payment of interest on January 1, 2018	enter a debit amount	enter a credit amount
	enter an account title to record the payment of interest on January 1, 2018	enter a debit amount	enter a credit amount
	(To record payment of interest)
Jan. 1, 2023	enter an account title to record the redemption of the bonds on January 1, 2018	enter a debit amount	enter a credit amount
	enter an account title to record the redemption of the bonds on January 1, 2018	enter a debit amount	enter a credit amount
	enter an account title to record the redemption of the bonds on January 1, 2018	enter a debit amount	enter a credit amount
	(To record the redemption of the bonds)

Answer 1

	Monty corp.
Oct.1,2021	Cash	828000
	Bonds payable		828000
Dec.31,2021	Interest exp. ( 828000 * 7% ) * 3/12	14490
	Interest payable		14490
Part 3	Monty corp.
	Balance sheet ( partial )
	For the year ended 31.12.2021
	Current liabilities
	Interest payable	14490
	Long term liabilities
	Bonds payable	828000
Oct.1,2022	Interest exp. ( 828000 * 7% ) * 9/12	43470
	Interest payable	14490
	Cash		57960
Dec.31,2022	Interest exp. ( 828000 * 7% ) * 3/12	14490
	Interest payable		14490
Jan.1,2023	Interest payable	14490
	Cash		14490
Jan.1,2023	Bonds payable	828000
	Loss on redepmtion	33120
	Cash ( 828000 * 104 % )		861120