On April 1, 2014, Seminole Company sold 24,660 of its 11%, 15-year, $1,000 face
ID: 2464183 • Letter: O
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.)
Please show your work!
(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
Date Accounts Titles and Explanation Debit Credit 4/1/2014 Cash (24,660*980) $24,166,800.00 Discount on issue of Bonds (24,660*20) $493,200.00 11% Bonds Payable $24,660,000.00 10/1/2014 Interest expense $1,372,740.00 Discount on issue of Bonds (493,200/30) $16,440.00 Cash (24,660,000*11%*6/12) $1,356,300.00 12/31/2014 Interest expense $678,150.00 Interest payable (24,660,000*11%*3/12) $678,150.00 3/1/2015 Interest expense $307,083.33 Interest payable (6700*1000*11%*3/12) $184,250.00 Cash (6700*1000*11%*2/12) $122,833.33 3/1/2015 11% Bonds Payable (6,700*1000) $6,700,000.00 Cash (Balancing figure) $283,633.33 Discount on issue of Bonds (6700*20*29/30) $129,533.33 Common stock (221,100*10) $2,211,000.00 Additional capital in excess of par ((221,100*21) $4,643,100.00
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.