The following transactions were completed by Montague Inc., whose fiscal year is
ID: 2436328 • Letter: T
Question
The following transactions were completed by Montague Inc., whose fiscal year is the calendar year:
1. Journalize the entries to record the foregoing transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. When required, round amounts to the nearest dollar.
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.
$
with the semiannual interest payment. 31. Closed the interest expense account. Year 2 June 30. Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined
with the semiannual interest payment.. Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined with the semiannual interest payment. 31. Closed the interest expense account. Year 3 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.)
Explanation / Answer
Answers
Year 1 July1
Cash
$ 62,817,040.00
Premium on Bonds Payable
$ 7,817,040.00
Bonds Payable
$ 55,000,000.00
Dec.31
Interest Expense
$ 2,084,148.00
Premium on Bonds Payable
$ 390,852.00
Cash
$ 2,475,000.00
Dec.31
Income Summary
$ 2,084,148.00
Interest Expense
$ 2,084,148.00
Year 2 June 30
Interest Expense
$ 2,084,148.00
Premium on Bonds Payable
$ 390,852.00
Cash
$ 2,475,000.00
Dec.31
Interest Expense
$ 2,084,148.00
Premium on Bonds Payable
$ 390,852.00
Cash
$ 2,475,000.00
Dec.31
Income Summary
$ 4,168,296.00
Interest Expense
$ 4,168,296.00
Year 3 June 30
Bonds Payable
$ 55,000,000.00
Premium on Bonds Payable
$ 6,253,632.00
Gain on Redemption of Bonds
$ 4,603,632.00
Cash
$ 56,650,000.00
a. Year 1
$ 2,084,148.00
b. Year 2
$ 4,168,296.00
Bonds Payable
$ 55,000,000.00
Premium on Bonds Payable
$ 7,817,040.00
Year 1 Amortised
$ (390,852.00)
Year 2 amortised
$ (781,704.00)
$ 6,644,484.00
Carrying Value of Bonds as of Dec 31, Year 2
$ 61,644,484.00
Year 1 July1
Cash
$ 62,817,040.00
Premium on Bonds Payable
$ 7,817,040.00
Bonds Payable
$ 55,000,000.00
Dec.31
Interest Expense
$ 2,084,148.00
Premium on Bonds Payable
$ 390,852.00
Cash
$ 2,475,000.00
Dec.31
Income Summary
$ 2,084,148.00
Interest Expense
$ 2,084,148.00
Year 2 June 30
Interest Expense
$ 2,084,148.00
Premium on Bonds Payable
$ 390,852.00
Cash
$ 2,475,000.00
Dec.31
Interest Expense
$ 2,084,148.00
Premium on Bonds Payable
$ 390,852.00
Cash
$ 2,475,000.00
Dec.31
Income Summary
$ 4,168,296.00
Interest Expense
$ 4,168,296.00
Year 3 June 30
Bonds Payable
$ 55,000,000.00
Premium on Bonds Payable
$ 6,253,632.00
Gain on Redemption of Bonds
$ 4,603,632.00
Cash
$ 56,650,000.00
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