(Entries for Life Cycle of Bonds) On April 1, 2010, Seminole Company sold 15,000 of its 11%,...

Question

(Entries for Life Cycle of Bonds) On April 1, 2010, Seminole Company sold 15,000 of its 11%, 15-year, $1,000 face value bonds at 97. Interest payment dates are April 1 and October 1, and the company uses the straight-line method of bond discount amortization. On March 1, 2011, Seminole took advantage of favorable prices of its stock to extinguish 6,000 of the bonds by issuing 200,000 shares of its $10 par value common stock. At this time, the accrued interest was paid in cash. The company’s stock was selling for $31 per share on March 1, 2011.
Prepare the journal entries needed on the books of Seminole Company to record the following.
(a) April 1, 2010: issuance of the bonds.
(b) October 1, 2010: payment of semiannual interest.
(c) December 31, 2010: accrual of interest expense.
(d) March 1, 2011: extinguishment of 6,000 bonds. (No reversing entries made.)

David · Accepted Answer

CHAPTER I
	(a)
	4/1/12
	Cash (15,000 X $1,000 X 97%)
	14,550,000
	
	
	
	Discount on Bonds Payable
	450,000
	
	
	
	
Bonds Payable
	
	15,000,000
	
	
	
	
	
	(b)
	10/1/12
	Interest Expense
	840,000
	
	
	
	
Cash
	
	825,000*
	
	
	
Discount on Bonds Payable
	
	15,000**
	
	
	
*$15,000,000 X .11 X 6/12 = 
	
	
	
	
	
     $825,000
	
	
	
	
	
**$450,000 ÷ 180 months =
	
	
	
	
	
     $2,500/mo.; $2,500/mo.
	
	
	
	
	
     X 6 months = $15,000
	
	
	
	
	
	
	
	(c)
	12/31/12
	Interest Expense
	420,

(Entries for Life Cycle of Bonds) On April 1, 2010, Seminole Company sold 15,000 of its 11%, 15-year, $1,000 face value bonds at 97. Interest payment dates are April 1 and October 1, and the company...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment