On April 1, 2014, Seminole Company sold 15,000 of
its 11%, 15-year, $1,000 face value bonds at 97.
P14-7 Seminole Company
P14-7 (Entries for Life Cycle of Bonds) On April 1,
2014, Seminole Company sold 15,000 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, 2015,
Seminole took advantage of favorable prices of its stock to extinguish 6,000 of
the bonds by issuing 200,000 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 $31 per share on March 1, 2015.
Instructions
Prepare the journal entries needed on the books of
Seminole Company to 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 6,000 bonds.
(No reversing entries made.)
TUTORIAL
PREVIEW
P14-7
|
(a)
|
01/04/2014
|
Cash
(15,000 X $1,000 X 97%)
|
14,550,000
|
|
|
|
|
Discount
on Bonds Payable
|
450,000
|
|
|
|
|
Bonds Payable
|
|
15,000,000
|
File name P14-7 Seminole Company.xls File
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