Question

Entries for Bonds Payable and installment Note Transactions The following transactions were completed by Montague Inc., whose fiscal year is the calendar year: Year 1 Issued $2,090,000 of five year, 8% callable bonds dated July 1, Year 1, a market (effective) tate of 10% oving cach of July 1 $1.928.612. leterest is payable semiannually on December jl and June 30. Borrowed $170,000 by issuing a 10-year, 8% installment note to Intexicon Bank. The note requires annual payme Oct. 1 the first payment occurring on September 30, Year 2 31. Accrued $3,400 of interest on the installment note. The interest is payable on the date of the next installment note paymer Ped the semiannual interest on the bonds. The bond discount amortization of $16,139 is combined with the manual payment. Paid the semiannual interest on the bonds. The bond discount amortization of $16,139 is combined with the semiannual in payment. Paid the annual payment on the note, which consisted of interest of $13,600 and principal of $11735 31. Accrued $3,165 of interest on the instaliment note. The interest is payable on the date of the next instalment note paymen Paid the semiannual interest on the bonds. The bond discount amortization of 516,119 is combined with the semiannua payment Year 3 ter Dame Recorded the redemption of the bonds, which were able 9. The best in the band discount account is 96.29 June 30. interest and monition of discount have been recorded Record the redemption Sept. 30. Paid the second annual payment on the note, tich consisted of rest of $12.61 and opal of $12,674 Required: 1. Joumalize the entries to record the foregong transactions for compound transaction mount box does not require an entry leave it When required, round your answers to the nearest Date

Answer 1

	(a) Journal Entries
JOURNAL
Date	Accounts	Debit	Credit
Year 1
July.1	Cash	1,928,617
	Discount on Bonds Payable	161,383
	Bonds Payable		2,090,000
Oct. 1	Cash	170,000
	Note payable (Long term)		170,000
Dec. 31	Interest Expense	3400
	Interest Payable		3400
Dec. 31	Interest Expense	99739
	Discount on Bonds Payable		16139
	Cash		83600
Dec 31	Income summary	103,139
	Interest expense		103,139
Year 2
Jun. 30	Interest Expense	99739
	Discount on Bonds Payable		16139
	Cash		83600
Sept. 30	Note payable (Long term)	11735
	Interest Expense	10200
	Interest Payable	3400
	Cash		25335
Dec. 31	Interest Expense	3165
	Interest Payable		3165
Dec. 31	Interest Expense	99739
	Discount on Bonds Payable		16139
	Cash		83600
Year 3
Jun. 30	Bonds Payable	2,090,000
	Loss on redemption of  Bonds Payable	55029
	Discount on Bonds Payable		96829
	Cash		2,048,200
Sept. 30	Note payable (Long term)	12674
	Interest Expense	9696
	Interest Payable	3165
	Cash		25335