On April 1, 2014, Seminole Company sold 24,660 of its 11%, 15-year, $1,000 face

Question

On April 1, 2014, Seminole Company sold 24,660 of its 11%, 15-year, $1,000 face value bonds at 98. Interest payment dates are April 1 and October 1, and the company uses the straight-line method of bond discount amortization. On March 1, 2015, Seminole took advantage of favorable prices of its stock to extinguish 6,700 of the bonds by issuing 221,100 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, 2015.

Prepare the journal entries needed on the books of Seminole Company to record the following. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

4/1/14

10/1/14

12/31/14

3/1/15

3/1/15

(To record extinguishment of the bonds.)

(a) April 1, 2014: issuance of the bonds. (b) October 1, 2014: payment of semiannual interest. (c) December 31, 2014: accrual of interest expense. (d) March 1, 2015: extinguishment of 6,700 bonds. (No reversing entries made.)

Explanation / Answer

4/1/2004 BANK A/C...............................................Dr 2416680

DISCOUNT ON ISSUE OF BOND A/C......Dr 49320

TO 11%BOND A/C 2466000

01/10/2014 INTREST ON 11%BOND A/C............................Dr 1356300

TO BANK A/C 1356300

31/12/2014 INTREST ON BOND A/C...................................Dr 678150

TO INTREST PAYBLE A/C 678150

SORRY, I DON'T KNOW THE JOURNAL ENTRY FOR EXTINGUISHMENT OF BOND

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