menu
bartleby
search
close search
Hit Return to see all results
close solutoin list

The following transactions were completed by Montague Inc., whose fiscal year is the calendar year: Instructions 1. Journalize the entries to record the foregoing transactions. 2. Indicate the amount of the interest expense in (a) Year 1 and (b) Year 2. 3. Determine the carrying amount of the bonds as of December 31, Year 2.

BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

Solutions

Chapter
Section
BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 14, Problem 4PB
Textbook Problem
1 views

The following transactions were completed by Montague Inc., whose fiscal year is the calendar year:

Chapter 14, Problem 4PB, The following transactions were completed by Montague Inc., whose fiscal year is the calendar year:

Instructions

  1. 1. Journalize the entries to record the foregoing transactions.
  2. 2. Indicate the amount of the interest expense in (a) Year 1 and (b) Year 2.
  3. 3. Determine the carrying amount of the bonds as of December 31, Year 2.

1.

To determine

Journalize the entries to record the transactions.

Explanation of Solution

Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations.

Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value.

Installment note: It is a debt in which the borrower is required to pay equal periodic payments to the lender based on the term of the note.

Journalize the entries to record the transactions.

DateAccounts and ExplanationPost Ref.

Debit

($)

Credit

($)

Year 1Cash 62,817,040 
July  1       Premium on Bonds Payable (1)  7,817,40
 Bonds Payable  55,000,000
 (To record issue of bonds at premium)   
     
October 1Cash 450,000 
 Notes Payable  450,000
 (To record issue of 6% notes for cash)   
     
December 31Interest Expense  9,000 
 Interest Payable  9,000
 (To record interest accrued on installment note)   
     
December 31Interest Expense (4) 2,084,148 
 Premium on Bonds Payable (2) 390,852 
 Cash (3)  2,475,000
 (To record semiannual interest payment and amortization on bonds)   

Table (1)

DateAccounts and ExplanationPost Ref.

Debit

($)

Credit

($)

Year 2Interest Expense (4) 2,084,148 
June 30Premium on Bonds Payable (2) 390,852 
 Cash (3)  2,475,000
 (To record semiannual interest payment and amortization on bonds)   
     
September 30Interest Expense  27,000 
 Interest Payable 9,000 
 Notes Payable  61,342 
 Cash  97,342
 (To record the annual payment on note)   
     
December 31Interest Expense 7,773 
 Interest Payable  7,773
 To record interest accrued on installment note)   
     
December 31Interest Expense (4) 2,084,148 
 Premium on Bonds Payable (2) 390,852 
 Cash (3)  2,475,000
 (To record semiannual interest payment and amortization on bonds)   

Table (2)

DateAccounts and ExplanationPost Ref.

Debit

($)

Credit

($)

Year 3Bonds Payable 55,000,000 
June 30Premium on Bonds Payable  6,253,632 
      Gain on Redemption of Bonds (6)  4,603,632
     Cash (5)  56,650,000
 (To record redemption of bonds)   
     
September 30Interest Expense  23,320 
 Interest Payable 7,773 
 Notes Payable  66,249 
 Cash  97,342
 (To record the annual payment on note)   

Table (3)

Working note (1):

Calculate discount on bonds payable.

Premium on bonds payable = (Cash receivedFace value  )   =$62,817,040$55,000,000=$7,817,040

Working note (2):

Calculate premium on bonds payable semiannually

2.

a.

To determine

Calculate the amount of interest expense in Year 1.

b.

To determine

Calculate the amount of interest expense in Year 2.

3.

To determine

Calculate the carrying amount of bonds as of December 31, Year 2.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Chapter 14 Solutions

Financial Accounting
Show all chapter solutions
add
Ch. 14 - Frey Co. is considering the following alternative...Ch. 14 - Brower Co. is considering the following...Ch. 14 - On January 1, the first day of the fiscal year, a...Ch. 14 - On January 1, the first day of the fiscal year, a...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - Using the bond from Practice Exercise 14-3A,...Ch. 14 - Using the bond from Practice Exercise 14-3B,...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - Using the bond from Practice Exercise 14-5A,...Ch. 14 - Using the bond from Practice Exercise 14-5B,...Ch. 14 - A 1,500,000 bond issue on which there is an...Ch. 14 - A 1,200,000 bond issue on which there is an...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - On the first day of the fiscal year, a company...Ch. 14 - Berry Company reported the following on the...Ch. 14 - Averill Products Inc. reported the following on...Ch. 14 - Domanico Co., which produces and sells biking...Ch. 14 - Based on the data in Exercise 14-1, what factors...Ch. 14 - The financial statements for Nike, Inc., are...Ch. 14 - Stone Energy Corporations 7.5% bonds due in 2022...Ch. 14 - Thomson Co. produces and distributes...Ch. 14 - On the first day of its fiscal year, Chin Company...Ch. 14 - Smiley Corporation wholesales repair products to...Ch. 14 - Adele Corp., a wholesaler of music equipment,...Ch. 14 - Emil Corp. produces and sells wind-energy-driven...Ch. 14 - On the first day of the fiscal year, Shiller...Ch. 14 - On January 1, Year 1, Luzak Company issued a...Ch. 14 - On January 1, Year 1, Bryson Company obtained a...Ch. 14 - At the beginning of the current year, two bond...Ch. 14 - The following data were taken from recent annual...Ch. 14 - Loomis, Inc. reported the following on the...Ch. 14 - Iacouva Company reported the following on the...Ch. 14 - Tommy John is going to receive 1,000,000 in three...Ch. 14 - Determine the present value of 200,000 to be...Ch. 14 - On January 1, you win 60,000,000 in the state...Ch. 14 - Assume the same data as in Exercise 14-19, except...Ch. 14 - Pinder Co. produces and sells high-quality video...Ch. 14 - Moss Co. issued 42,000,000 of five-year, 11%...Ch. 14 - On the first day of its fiscal year, Ebert Company...Ch. 14 - Shunda Corporation wholesales parts to appliance...Ch. 14 - Ware Co. produces and sells motorcycle parts. On...Ch. 14 - Boyd Co. produces and sells aviation equipment. On...Ch. 14 - Three different plans for financing an 18,000,000...Ch. 14 - On July 1, Year 1, Danzer Industries Inc. issued...Ch. 14 - Campbell Inc. produces and sells outdoor...Ch. 14 - The following transactions were completed by...Ch. 14 - On July 1, Year 1, Danzer Industries Inc. issued...Ch. 14 - Campbell, Inc. produces and sells outdoor...Ch. 14 - Three different plans for financing an 80,000,000...Ch. 14 - On July 1, Year 1, Livingston Corporation, a...Ch. 14 - Rodgers Corporation produces and sells football...Ch. 14 - The following transactions were completed by...Ch. 14 - On July 1, Year 1, Livingston Corporation, a...Ch. 14 - Rodgers Corporation produces and sells football...Ch. 14 - CEG Capital Inc. is a large holding company that...Ch. 14 - Nordbock Inc. reports the following outstanding...Ch. 14 - Alex Kelton recently won the jackpot in the...Ch. 14 - Xentec Inc. has decided to expand its operations...Ch. 14 - You hold a 25% common stock interest in YouOwnIt,...Ch. 14 - The following financial data (in thousands) were...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions add
What distinguishes money from other assets in the economy?

Brief Principles of Macroeconomics (MindTap Course List)

Give an example of each form.

Foundations of Business (MindTap Course List)

EXPECTED INTEREST RATE Lloyd Corporations 14% coupon rate, semiannual payment. 1,000 par value bonds, which mat...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)