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Entries for Bonds Payable and Installment Note Transactions The following transactions were completed by Montague Inc., whose fiscal year is the calendar year: Year 1
Entries for Bonds Payable and Installment Note Transactions
The following transactions were completed by Montague Inc., whose fiscal year is the calendar year:
Year 1 | |
July 1. | Issued $1,330,000 of five-year, 11% callable bonds dated July 1, Year 1, at a market (effective) rate of 12%, receiving cash of $1,281,055. Interest is payable semiannually on December 31 and June 30. |
Oct. 1. | Borrowed $380,000 by issuing a 10-year, 8% installment note to Intexicon Bank. The note requires annual payments of $57,631, with the first payment occurring on September 30, Year 2. |
Dec. 31. | Accrued $7,600 of interest on the installment note. The interest is payable on the date of the next installment note payment. |
Dec. 31. | Paid the semiannual interest on the bonds. The bond discount amortization of $4,895 is combined with the semiannual interest payment. |
Year 2 | |
June 30. | Paid the semiannual interest on the bonds. The bond discount amortization of $4,895 is combined with the semiannual interest payment. |
Sept. 30. | Paid the annual payment on the note, which consisted of interest of $30,400 and principal of $27,231. |
Dec. 31. | Accrued $7,055 of interest on the installment note. The interest is payable on the date of the next installment note payment. |
Dec. 31. | Paid the semiannual interest on the bonds. The bond discount amortization of $4,895 is combined with the semiannual interest payment. |
Year 3 | |
June 30. | Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $29,367 after payment of interest and amortization of discount have been recorded. (Record the redemption only.) |
Sept. 30. | Paid the second annual payment on the note, which consisted of interest of $28,222 and principal of $29,409. |
eBook Show Me How Calculator Print Item Oct. 1 Dec. 31-Note Dec. 31-Bond Year 2 June 30 Sept. 30 Dec. 31. Note E Show Me How eBook Print item Calculator Dec. 31-Note Dec. 31-Bond Year 3 June 30 Sept. 30 2. Indicate the amount of the interest expense in (a) Year 1 and (b) Year 2. a. Year 1 b. Year 2 3. Determine the carrying amount of the bonds as of December 31, Year 2 Check My Work 1 more Check My Wo es remaining
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