PR 12-4b  Entries for bonds payable and installment note transactions

The following transactions were completed by Montague Inc., whose fiscal year  is  the calendar  year:

2016

July 1. Issued $55,000,000 of 10-year, 9% callable bonds dated July 1, 2016, at a market (effective) rate of 7%, receiving cash of $62,817,040. Interest is payable semian- nually  on  December  31  and  June 30.

Oct. 1. Borrowed $450,000 by issuing a six-year, 8% installment note to Intexicon Bank. The note requires annual payments of $97,342, with the first payment occurring on September 30,  2017.

Dec. 31. Accrued $9,000 of interest on the installment note. The interest is payable on the date of the next installment note payment.

31.   Paid the semiannual interest on the bonds. The bond discount amortization of

$390,852 is combined with the semiannual interest    payment.

31.     Closed the interest expense account.

2017

June 30.   Paid the semiannual interest on the bonds. The bond discount amortization of

$390,852 is combined with the semiannual interest    payment.

Sept. 30. Paid the annual payment on the note, which consisted of interest of $36,000 and principal of  $61,342.

Dec. 31. Accrued $7,773 of interest on the installment note. The interest is payable on the date of the next installment note payment.

31.   Paid the semiannual interest on the bonds. The bond discount amortization of

$390,852 is combined with the semiannual interest    payment.

31.   Closed the interest expense   account.

2018

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 amor- tization of premium have been recorded. (Record the redemption only.)

Sept. 30.   Paid the second annual payment on the note, which consisted of interest of

$31,093 and principal of  $66,249.

Instructions

1.     Journalize the entries to record the foregoing transactions.

2.     Indicate the amount of the interest expense in (a) 2016 and (b) 2017.

 

3.     Determine the carrying amount of the bonds as of December 31, 2017.

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Status NEW Posted 08 Oct 2017 07:10 PM My Price 6.00

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file 1507491972-PR 12-4b Entries for bonds payable and installment note transactions.docx preview (628 words )

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