Answered: (a) April 1, 2020: issuance of the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On April 1, 2020, Oriole Company sold 20700 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, 2021, Headland took advantage of favorable prices of its stock to extinguish 4800 of the bonds by issuing 158,400 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 $30 per share on March 1, 2021.

Prepare the journal entries needed on the books of Headland Company to record the following. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final 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.)

(a) April 1, 2020: issuance of the bonds.

(b) October 1, 2020: payment of semiannual interest.

(d) March 1, 2021: extinguishment of 4,800 bonds. (No reversing entries made.)

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