Question

eBook Show Me How Calculator Print Item Entries for Bonds Payable, including bond redemption The following transactions were completed by Montague Inc., whose fiscal year is the calendar year: 2011 July 1. Issued $55,000,000 of 10-year, 9% callable bonds dated July 1, 2011, 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. 2012 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 2013 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) 1. Journalize the entries to record the foregoing transactions. If an amount box does not require an entry, leave it blank. When required, round amounts to the nearest dollar 2011 1 but III

Answer 1

Solution 1:

Journal Entries - Montague Inc.
Date	Particulars	Debit	Credit
1-Jul-20Y1	Cash Dr	$62,817,040.00
	To Bond Payable		$55,000,000.00
	To Premium on Bond Payable		$7,817,040.00
	(To record issue of bond at premium)
31-Dec-20Y1	Interest Expense Dr	$2,084,148.00
	Premium on bond payable Dr	$390,852.00
	To Cash		$2,475,000.00
	(To record interest payment and premium amortization)
30-Jun-20Y2	Interest Expense Dr	$2,084,148.00
	Premium on bond payable Dr	$390,852.00
	To Cash		$2,475,000.00
	(To record interest payment and premium amortization)
31-Dec-20Y2	Interest Expense Dr	$2,084,148.00
	Premium on bond payable Dr	$390,852.00
	To Cash		$2,475,000.00
	(To record interest payment and premium amortization)
30-Jun-20Y3	Bond payable Dr	$55,000,000.00
	Premium on bond payable Dr	$6,253,632.00
	To Cash		$56,650,000.00
	To Gain on retirement of bond		$4,603,632.00
	(To record early retirement of bond)

Solution 2:

Interest expense - 20Y1 = $2,084,148

Interest expense - 20Y2 = $2,084,148 + $2,084,148 = $4,168,296