The Following Section Is Taken from Greene Corp's Balance Sheet

question 82

Essay

The following section is taken from Greene Corp's balance sheet at December 31 2016.
Current liabilities
Interest Payable $ 180000
Long-term liabilities
Bonds Payable 9% due January 1 2021 2000000
Interest is payable annually on January 1. The bonds are callable on any interest date.
Instructions
(a) Journalize the payment of the bond interest on January 1 2017.
(b) Assume that on January 1 2017 after paying interest Greene calls bonds having a face value of $800000. The call price is 106. Record the redemption of the bonds.
(c) Prepare the entry to record the accrual of interest on December 31 2017 assuming no previous accrual of interest on the remaining bonds.

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Definitions:

Government Borrowing

The process by which a government raises funds to finance its expenditure that exceeds revenue, typically through issuing debt securities.

Budget Field

A category within a budget, specifying an area of financial activity, such as revenues, expenses, or investments.

Interest Rates

The cost of borrowing money or the return on invested funds, typically expressed as a percentage.

After-Tax Profit

The amount of income left after all taxes have been deducted from the gross income.