Entries for bonds payable, including bond redemptionThe following transactions were completed by Montague Inc., whosefiscal year is the calendar year: 20Y1 July 1. Issued $55,000,000 of 10-year, 9% callable bonds dated July 1,20Y1, at a market (effective) rate of 7%, receiving cash of $62,817,040.Interest is payable semiannually on December 31 and June 30. Dec. 31. Paid the semiannual interest on the bonds. The bonddiscount amortization of $390,852 is combined with the semiannualinterest payment. 20Y2 June 30. Paid the semiannual interest on the bonds. The bonddiscount amortization of $390,852 is combined with the semiannualinterest payment. Dec. 31. Paid the semiannual interest on the bonds. The bonddiscount amortization of $390,852 is combined with the semiannualinterest payment. 20Y3June 30. Recorded the redemption of the bonds, which were called at103. The balance in the bond premium account is $6,253,632 afterpayment of interest and amortization of premium have been recorded. (Record the redemption only.) Instructions1. Journalize the entries to record the foregoing transactions. 2. Indicate the amount of the interest expense in (a) 20Y1 and (b) 20Y2.3. Determine the carrying amount of the bonds as of December 31,20Y2.
Entries for bonds payable, including bond redemption
The following transactions were completed by Montague Inc., whose
fiscal year is the calendar year:
20Y1
July 1. Issued $55,000,000 of 10-year, 9% callable bonds dated July 1,
20Y1, at a market (effective) rate of 7%, receiving cash of $62,817,040.
Interest is payable semiannually on December 31 and June 30.
Dec. 31. Paid the semiannual interest on the bonds. The bond
discount amortization of $390,852 is combined with the semiannual
interest payment.
20Y2
June 30. Paid the semiannual interest on the bonds. The bond
discount amortization of $390,852 is combined with the semiannual
interest payment.
Dec. 31. Paid the semiannual interest on the bonds. The bond
discount amortization of $390,852 is combined with the semiannual
interest payment.
20Y3
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.)
Instructions
1.
2. Indicate the amount of the interest expense in (a) 20Y1 and (b) 20Y2.
3. Determine the carrying amount of the bonds as of December 31,
20Y2.
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