The following transactions were completed by Montague Inc , whose fiscal year is the calendar year Year 1 July 1 Issued $8,700,000 of five year, 9 callable bonds dated July 1, Year 1, at a market (effective) rate of 10 , receiving cash of $8,364,103 Interest is payable semiannually on December 31 and June 30 Oct 1 Borrowed $120,000 by issuing a 10 year, 7 installment note to Intexicon Bank The note requires annual payments of $17,085, with the first payment occurring on September 30, Year 2 Dec 31 Accrued $2,100 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 $33,590 is combined with the semiannual interest payment Year 2 June 30 Paid the semiannual interest on the bonds The bond discount amortization of $33,590 is combined with the semiannual interest payment Sept 30 Paid the annual payment on the note, which consisted of interest of $8,400 and principal of $8,685 Dec 31 Accrued $1,948 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 $33,590 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 $201,539 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 $7,792 and principal of $9,293 Required 1 Journalize the entries to record the foregoing transactions For compound transactions, if an amount box does not require an entry, leave it blank or enter 0 When required, round your answers to the nearest dollar 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 $

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 18, 2024

The following transactions were completed by Montague Inc., whose fiscal year is the calendar year: Year 1 July 1. Issued $8,700,000 of five-year, 9% callable

The following transactions were completed by Montague Inc., whose fiscal year is the calendar year:

Year 1
July 1.	Issued $8,700,000 of five-year, 9% callable bonds dated July 1, Year 1, at a market (effective) rate of 10%, receiving cash of $8,364,103. Interest is payable semiannually on December 31 and June 30.
Oct. 1.	Borrowed $120,000 by issuing a 10-year, 7% installment note to Intexicon Bank. The note requires annual payments of $17,085, with the first payment occurring on September 30, Year 2.
Dec. 31.	Accrued $2,100 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 $33,590 is combined with the semiannual interest payment.
Year 2
June 30.	Paid the semiannual interest on the bonds. The bond discount amortization of $33,590 is combined with the semiannual interest payment.
Sept. 30.	Paid the annual payment on the note, which consisted of interest of $8,400 and principal of $8,685.
Dec. 31.	Accrued $1,948 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 $33,590 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 $201,539 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 $7,792 and principal of $9,293.

Required:

1. Journalize the entries to record the foregoing transactions. For compound transactions, if an amount box does not require an entry, leave it blank or enter "0". When required, round your answers to the nearest dollar.

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. $