Solution:
Journal Entries - Martinez Company | |||
Date | Particulars | Debit | Credit |
1-Apr-17 | Cash Dr (18000*1000*96%) | $17,280,000.00 | |
Discount on bond payable Dr (18000*1000*4%) | $720,000.00 | ||
To Bond Payable | $18,000,000.00 | ||
(To record issue of bond) | |||
1-Oct-17 | Interest expense Dr | $1,104,000.00 | |
To Cash ($18,000,000*12%*6/12) | $1,080,000.00 | ||
To Discount on bond payable ($720,000/30) | $24,000.00 | ||
(To record semiannual interest payment and discount amortization) | |||
31-Dec-17 | Interest expense Dr | $552,000.00 | |
To Interest payable ($18,000,000*12%*3/12) | $540,000.00 | ||
To Discount on bond payable ($720,000/15*3/12) | $12,000.00 | ||
(To record interest accrued and discount amortization) | |||
1-Mar-18 | Interest expense Dr | $139,333.00 | |
Interest payable Dr (6600*$1,000*12%*3/12) | $198,000.00 | ||
To Cash (6600*$1,000*12%*5/12) | $330,000.00 | ||
To Discount on bond payable ($6,600,000*4%/15*5/12) | $7,333.00 | ||
(To record interest payment to retiring bond holders) | |||
1-Mar-18 | Bond Payable Dr | $6,600,000.00 | |
Loss on retirement of bond Dr | $617,467.00 | ||
To Discount on bond payable ($6,600,000*4% - $264,000/15*11/12) | $247,867.00 | ||
To Common Stock (217800*$10) | $2,178,000.00 | ||
To Paid in capital in excess of par - common stock (217800*$22) | $4,791,600.00 | ||
(To record extinguishment of bond) |
Problem 14-7 On April 1, 2017, Martinez Company sold 18,000 of its 12%, 15-year, $1,000 face...
roblem 14-7 Your answer is partially correct. Try again. On April 1, 2017, Martinez Company sold 23,400 of its 11%, 15-year, $1,000 face value bonds at 96. Interest payment dates are April 1 and October 1, and the company uses the straight-line method of bond discount amortization. On March 1, 2018, Martinez took advantage of favorable prices of its stock to extinguish 5,400 of the bonds by issuing 178,200 shares of its $10 par value common stock. At this time,...
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