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 $55,000,000 of 10-year, 9% callable bonds dated July 1, Year 1, at a market (effective) rate of 7%, receiving cash of $62,817,040. Interest is payable semiannually on December 31 and June 30.
Oct. 1.	Borrowed $450,000 by issuing a six-year, 8% installment note to Intexicon Bank. The note requires annual payments of $97,342, with the first payment occurring on September 30, Year 2.
Dec. 31.	Accrued $9,000 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 premium amortization of $390,852 is combined with the semiannual interest payment.
Year 2
June 30.	Paid the semiannual interest on the bonds. The bond premium amortization of $390,852 is combined with the semiannual interest payment.
Sept. 30.	Paid the annual payment on the note, which consisted of interest of $36,000 and principal of $61,342.
Dec. 31.	Accrued $7,773 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 premium amortization of $390,852 is combined with the semiannual interest payment.
Year 3
June 30.	Recorded the redemption of the bonds, which were called at 103. The balance in the bond premium account is $6,253,632 after payment of interest and amortization of premium have been recorded. Record the redemption only.
Sept. 30.	Paid the second annual payment on the note, which consisted of interest of $31,093 and principal of $66,249.

Required:

1. Journalize the entries to record the foregoing transactions in chronological order. For a compound transaction, if an amount box does not require an entry, leave it blank. When required, round amounts to the nearest dollar.

Date	Account	Debit	Credit
Year 1
July 1	Bonds PayableCashInterest ExpenseInterest PayableNotes PayablePremium on Bonds PayableCash	fill in the blank 2	fill in the blank 3
	Accounts PayableDiscount on Bonds PayableInterest ExpenseInterest PayableInterest RevenuePremium on Bonds PayablePremium on Bonds Payable	fill in the blank 5	fill in the blank 6
	Bonds PayableCashDiscount on Bonds PayableInterest ExpenseInterest PayableNotes PayableBonds Payable	fill in the blank 8	fill in the blank 9
Oct. 1	Bonds PayableCashInterest ExpenseInterest PayableNotes PayablePremium on Bonds PayableCash	fill in the blank 11
	Bonds PayableCashInterest ExpenseInterest PayableNotes PayablePremium on Bonds PayableNotes Payable		fill in the blank 13
Dec. 31	Bonds PayableCashInterest ExpenseInterest PayableNotes PayablePremium on Bonds PayableInterest Expense	fill in the blank 15
	Bonds PayableCashInterest ExpenseInterest PayableNotes PayablePremium on Bonds PayableInterest Payable		fill in the blank 17
Dec. 31	Bonds PayableCashIncome SummaryInterest ExpenseInterest PayableNotes PayableInterest Expense	fill in the blank 19	fill in the blank 20
	Accounts PayableBonds PayableCashInterest PayableNotes PayablePremium on Bonds PayablePremium on Bonds Payable	fill in the blank 22	fill in the blank 23
	Bonds PayableCashIncome SummaryInterest ExpenseInterest PayableNotes PayableCash	fill in the blank 25	fill in the blank 26
Year 2
June 30	Bonds PayableCashDiscount on Bonds PayableInterest ExpenseInterest PayableNotes PayableInterest Expense	fill in the blank 28	fill in the blank 29
	Accounts PayableBonds PayableCashInterest PayableNotes PayablePremium on Bonds PayablePremium on Bonds Payable	fill in the blank 31	fill in the blank 32
	Bonds PayableCashInterest ExpenseInterest PayableNotes PayablePremium on Bonds PayableCash	fill in the blank 34	fill in the blank 35
Sept. 30	Accounts PayableBonds PayableCashIncome SummaryInterest ExpensePremium on Bonds PayableInterest Expense	fill in the blank 37	fill in the blank 38
	Accounts PayableBonds PayableCashIncome SummaryInterest PayableInterest ReceivableInterest Payable	fill in the blank 40	fill in the blank 41
	Accounts PayableBonds PayableCashIncome SummaryNotes PayablePremium on Bonds PayableNotes Payable	fill in the blank 43	fill in the blank 44
	Accounts PayableCashPremium on Bonds PayableInterest ExpenseInterest PayableNotes PayableCash	fill in the blank 46	fill in the blank 47
Dec. 31	Accounts PayableBonds PayableCashInterest ExpenseInterest PayableNotes PayableInterest Expense	fill in the blank 49
	Accounts PayableCashInterest ExpenseInterest PayablePremium on Bonds PayableNotes PayableInterest Payable		fill in the blank 51
Dec. 31	Bonds PayableCashIncome SummaryInterest ExpenseInterest PayableNotes PayableInterest Expense	fill in the blank 53	fill in the blank 54
	Bonds PayableCashInterest PayableInterest RevenueNotes PayablePremium on Bonds PayablePremium on Bonds Payable	fill in the blank 56	fill in the blank 57
	Accounts PayableBonds PayableCashInterest ExpenseInterest PayableInterest RevenueCash	fill in the blank 59	fill in the blank 60
Year 3
June 30	Bonds PayableCashDiscount on Bonds PayableGain on Redemption of BondsIncome SummaryInterest ExpenseBonds Payable	fill in the blank 62	fill in the blank 63
	CashPremium on Bonds PayableInterest ExpenseInterest PayableInterest ReceivableLoss on Redemption of BondsPremium on Bonds Payable	fill in the blank 65	fill in the blank 66
	Bonds PayableDiscount on Bonds PayableGain on Redemption of BondsInterest ExpenseInterest PayableNotes PayableGain on Redemption of Bonds	fill in the blank 68	fill in the blank 69
	Bonds PayableCashInterest RevenueInterest ExpenseNotes PayablePremium on Bonds PayableCash	fill in the blank 71	fill in the blank 72
Sept. 30	Accounts PayableBonds PayableCashIncome SummaryInterest ExpensePremium on Bonds Payable	fill in the blank 74	fill in the blank 75
	Accounts PayableBonds PayableCashInterest PayableLoss on Redemption of BondsPremium on Bonds Payable	fill in the blank 77	fill in the blank 78
	Accounts PayableBonds PayableCashGain on Redemption of BondsInterest RevenueNotes Payable	fill in the blank 80	fill in the blank 81
	Bonds PayableCashInterest ExpenseInterest PayableNotes PayablePremium on Bonds Payable	fill in the blank 83	fill in the blank 84

2. Indicate the amount of the interest expense in (a) Year 1 and (b) Year 2.

a. Year 1	$fill in the blank 85
b. Year 2	$fill in the blank 86

3. Determine the carrying amount of the bonds as of December 31, Year 2. $fill in the blank 87