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Entries for Bonds Payable, including bond redemption The following transactions were completed by Montague Inc., whose fiscal year is the calendar year: Year 1 July
Entries for Bonds Payable, including bond redemption
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. |
Dec. 31. | Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined with the semiannual interest payment. |
31. | Closed the interest expense account. |
Year 2 | |
June 30. | Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined with the semiannual interest payment.. |
Dec. 31. | Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined with the semiannual interest payment. |
31. | Closed the interest expense account. |
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.) |
1. Journalize the entries to record the foregoing transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. When required, round amounts to the nearest dollar.
Year 1 July1 | |||
Dec.31 | |||
Dec.31 | |||
Year 2 June 30 | |||
Dec.31 | |||
Dec.31 | |||
Year 3 June 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.
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