On April 1, 2020, Sheffield 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, Sheffield
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 Sheffield
Company to record the following. (Round intermediate calculations
to 6 decimal places, e.g. 1.251247 and final answers to 0 decimal
places, e.g. 38,548. If no entry is required, select "No Entry" for
the account titles and enter 0 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.)
No. Date Account Titles and Explanation Debit Credit
(a)
4/1/20
(b)
10/1/20
(c)
12/31/20
(d)
3/1/21
(To record interest and discount on bonds retired)
3/1/21
(To record extinguishment of the bonds)
On April 1, 2020, Sheffield Company sold 22,500 of its 11%, 15-year, $1,000 face value bonds...
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