On April 1, 2014, Seminole Company sold 26,100 of its 10%, 14-year, $1,000 face

Question

On April 1, 2014, Seminole Company sold 26,100 of its 10%, 14-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, 2015, Seminole took advantage of favorable prices of its stock to extinguish 7,200 of the bonds by issuing 237,600 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 $33 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.)

Common Stock

Paid-in Capital in Excess of par common stock

2,376,000

5,464,800

(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 7,200 bonds. (No reversing entries made.)

Explanation / Answer

Date Account tile and Explanation Debit($) Credit($) 31-03-2015 Interest Payable 180000                    Discount on bonds payable 13982                    Cash 166018 To record the interest expense on bonds for 3 months

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