FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:**Entries for Bonds Payable, Including Bond Redemption**
The following transactions were completed by Montague Inc., whose fiscal year is the calendar year:
**20Y1**
*July 1:* Issued $55,000,000 of 10-year, 9% callable bonds dated July 1, 20Y1, 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 premium amortization of $390,852 is combined with the semiannual interest payment.
**20Y2**
*June 30:* Paid the semiannual interest on the bonds. The bond premium amortization of $390,852 is combined with the semiannual interest payment.
*Dec. 31:* Paid the semiannual interest on the bonds. The bond premium amortization of $390,852 is combined with the semiannual interest payment.
**20Y3**
*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.**
- 20Y1 July 1
- Dec. 31
- 20Y2 June 30
- Dec. 31
- 20Y3 June 30
**2. Indicate the amount of the interest expense in (a) 20Y1 and (b) 20Y2.**
- a. 20Y1:
- b. 20Y2:
**3. Determine the carrying amount of the bonds as of December 31, 20Y2.**
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