Entries for bonds payable and installment note transactions The following transa
ID: 2425255 • Letter: E
Question
Entries for bonds payable and installment note transactions The following transactions were completed by Montague Inc., whose fiscal is the year calendar year: July 1. Issued $55.000.000 of 10-year. 9% callable bonds dated July I. 2014. at a market (effective) rate of 7%, receiving cash of $62.817.040 Interest to 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 $97342, with the first payment occurring on September.30, 2015. Dec. 31. Accrued $9.000 of interest on the installment note. The interest is payable on the date of the next installment note payment. 31. Paid the semiannual interest on the bonds The bonds premium is amortized annually in a separate journal entry. 31. Recorded bonds premium amortization of $390.852 which was determined using the straight-line method. 31. Closed the interest expense account. June 30. Paid the semiannual interest on the bonds. The bonds premium is amortized annually in a separate journal entry. 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. 31. Paid the semiannual interest on the bonds. The bonds premium to amortized annually in a separate journal entry. 31. Recorded bond premium amortization of $781.704. which was determined using the straight-line method. 31. Closed the interest expense account. 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. Instructions Journalize the entries to record the foregoing transactions. Indicate the amount of the interest expense in (a) 2014 and (b) 2015. Determine the carrying amount of the bonds as of December 31, 2015.Explanation / Answer
Answer:
Jul 1 : Cash..........................................Dr $ 62,817,040
Premium on Bonds Payable............................Cr $ 7,817,040
Bonds Payable...............................................Cr $ 55,000,000
Oct 1: Cash.........................................Dr $ 450,000
Notes Payable....................................Cr $ 450,000
Dec 31 : Interest Expenses.....................Dr. $ 9,000
Interest Payable....................................Cr $ 9,000
Dec 31. Interest Expenses.......................Dr $ 2,475,000
Cash.....................................................Cr $ 2,475,000
Dec 31. Premium on Bonds Payable.............................Dr. $ 390,852
Interest Expenses...................................................Cr. $ 390,852
Dec 31 Income Summary.............................................Dr $ 2,093,148
Interest Expenses...................................................Cr $ 2,093,148
Jun 30 Interest Expenses ..............................................Dr $ 2,475,000
Cash......................................................................Cr$ 2,475,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.