Question

Your answer is partially correct. On April 1, 2020, Monty Company sold 22,500 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, Monty 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, the accrued interest was paid in cash. The company's stock was selling for $32 per share on March 1, 2021. Prepare the journal entries needed on the books of Monty Company to record the following. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answers to O decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 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. (c) December 31, 2020: accrual of interest expense. (d) March 1, 2021: extinguishment of 5,400 bonds. (No reversing entries made.) Debit Credit No. Date Account Titles and Explanation (a) 4/1/20 Cash 21,825,000 Discount on Bonds Payable 675,000 Bonds Payable 22500000 (b) 10/1/20 Interest Expense 1,260,000 1,200 Discount on Bonds Payable 22,500 Cash 1,237,500

Answer 1

Answer is given below for c) and d)

working notes is also given

3/1/21 $99,000 $148,500 Interest Expense Interest payable To Discount on bonds payable To Cash (Being interest paid on bond) ($412,500/22,500*5,400) ($618,750/22,500*5,400) $1,800 (7,500/22,500*5,400) $245,700 Discount on bonds payable for 2 months for 22,500 bonds = $22,500/6*2 Interest for 2 months for 22,500 bonds =$1,237,500/6*2 For 5,400 bonds taken proportionately 3/1/21 $5,400,000 $454,500 Bonds payable Loss on redemption of bonds To Discount on bonds payable To Common stock To Paid in Capital if excess of par - Common stock |(To record conversion of bond into common stock) $152,100 $1,782,000 $3,920,400 $675,000 $162,000 ($675,000/22,500*5,400) Working notes: Balance of Discount on bonds payable Total discount on bonds payable for 22,500 shares Discount on bonds payable for 5,400 shares Less: Amortisation - 10/1/20 Amortisation till 3/1/21 Balance in Discount on bonds payable for 5,400 shares $5,400 $4,500 $152,100