Entries for Bonds Payable and Installment Note Transactions The following transa
ID: 2351644 • Letter: E
Question
Entries for Bonds Payable and Installment Note Transactions The following transactions were completed by Simmons Inc. , whose fiscal year is the calendar year: 2012 july 1 Issued $64, 000, 000 of 10-year, 12% callable bonds dated July 1, 2012, at a market (effective) rate of 14%, receiving cash of $57, 219, 878. Interest is payable semiannually on December 31 and June 30. oct 1. Borrowed $320, 000 as a five-year, 6% installment note from Ibis Bank. The note requires annual payments of $75, 967, with the first payment occurring on September 30, 2013. Dec. 31 Accrued $4, 800 of interest on the installment note. The interest is payable on the date of the next installment note payment. 31 Paid the semiannual interest on the bonds. The bond discount is amortized annually in a separate journal entry. 31 Recorded bond discount amortization of $339, 006, which was determined using the straight-line method. 31 Closed the interest expense account. 2013 June 30. Paid the semiannual interest on the bonds. Sept. 30. Paid the annual payment on the note, which consisted of interest of $19, 200 and principal of $56, 767. Dec. 31. Accrued $3, 948 of interest on the installment note. The interest is payable on the date of the next installment note payment. 31 Paid the semiannual interest on the bonds. The bond discount is amortized annually in a separate journal entry. 31Recorded bond discount amortization of $678, 012, which was determined using the straight-line method. 31Closed the interest expense account. 2014 June 30. Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $5, 424, 098 after payment of interest and amortization of discount have been recorded. (Record the redemption only. ) Sept. 30. Paid the second annual payment on the note, which consisted of interest of $15, 794 and principal of $60, 173. Journalize the entries to record the foregoing transactions in chronological order. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". When required, round your answer to the nearest dollar.Explanation / Answer
Cash DEBIT 57,219,878 Discount on bonds payable DEBIT 6,780,122 Bonds payable CREDIT 64,000,000 Cash DEBIT 320,000 Notes payable CREDIT 320,000 Interest expense DEBIT 4,800 Interest payable CREDIT 4,800 Interest expense DEBIT 3,840,000 Cash CREDIT 3,840,000 Interest expense DEBIT 339,006 Discount on bonds payable CREDIT 339,006 Income summary DEBIT 4,183,806 Interest expense CREDIT 4,183,806 2013 Interest expense DEBIT 3,840,000 Cash CREDIT 3,840,000 Notes payable DEBIT 56,767 Interest expense DEBIT 14,400 Interest payable DEBIT 4,800 Cash CREDIT 75,967 Interest expense DEBIT 3,948 Interest payable CREDIT 3,948 Interest expense DEBIT 3,840,000 Cash CREDIT 3,840,000 Interest expense DEBIT 678,012 Discount on bonds payable CREDIT 678,012 Income summary DEBIT 8,376,360 Interest expense CREDIT 8,376,360 2014 Bonds payable DEBIT 64,000,000 Loss on redemption of bonds DEBIT 4,483,104 Discount on bonds payable CREDIT 5,763,104 Cash CREDIT 62,720,000 Notes payable DEBIT 60,173 Interest expense DEBIT 11,846 Interest payable DEBIT 3,948 Cash CREDIT 75,967
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