On April 1, 2014, Seminole Company sold 15,120 of its 11%,15-year, $1,000 face value bonds at 97. Interest payment dates areApril 1 and October 1, and the company uses the straight-linemethod of bond discount amortization. On March 1, 2015, Seminoletook advantage of favorable prices of its stock to extinguish 6,600of the bonds by issuing 217,800 shares of its $10 par value commonstock. At this time, the accrued interest was paid in cash. Thecompanyâs stock was selling for $32 per share on March 1,2015.
Prepare the journal entries needed on the books of Seminole Companyto record the following.
(a) April 1, 2014: issuance of the bonds. (b) October 1, 2014: payment of semiannual interest. (c) December 31, 2014: accrual of interest expense. (d) March 1, 2015: extinguishment of 6,600 bonds. (No reversingentries made.)
On April 1, 2014, Seminole Company sold 15,120 of its 11%,15-year, $1,000 face value bonds at 97. Interest payment dates areApril 1 and October 1, and the company uses the straight-linemethod of bond discount amortization. On March 1, 2015, Seminoletook advantage of favorable prices of its stock to extinguish 6,600of the bonds by issuing 217,800 shares of its $10 par value commonstock. At this time, the accrued interest was paid in cash. Thecompanyâs stock was selling for $32 per share on March 1,2015.
Prepare the journal entries needed on the books of Seminole Companyto record the following.
| (a) | April 1, 2014: issuance of the bonds. | |
| (b) | October 1, 2014: payment of semiannual interest. | |
| (c) | December 31, 2014: accrual of interest expense. | |
| (d) | March 1, 2015: extinguishment of 6,600 bonds. (No reversingentries made.) |
Related questions
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Aubrey Inc. issued $4,425,000 of 9%, 10-year convertible bondson June 1, 2014, at 97 plus accrued interest. The bonds were datedApril 1, 2014, with interest payable April 1 and October 1. Bonddiscount is amortized semiannually on a straight-line basis.
On April 1, 2015, $1,659,375 of these bonds were converted into34,300 shares of $15 par value common stock. Accrued interest waspaid in cash at the time of conversion.
| (a) | Prepare the entry to record the interest expense at October 1,2014. Assume that accrued interest payable was credited when thebonds were issued. | |
| (b) | Prepare the entry to record the conversion on April 1, 2015.(Book value method is used.) Assume that the entry to recordamortization of the bond discount and interest payment has beenmade. |
