Common Stock Paid-in Capital in Excess of par common stock 2,376,000 5,464,800 O

Question

Common Stock

Paid-in Capital in Excess of par common stock

2,376,000

5,464,800

On April 1, 2014, Seminole Company sold 26,100 of its 10%, 14-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 7,200 of the bonds by issuing 237,600 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 $33 per share on March 1, 2015.

Prepare the journal entries needed on the books of Seminole Company to record the following. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date Acct. Title Debit Credit 4/1/14 Cash 25,317,000 Discount on Bonds Payable 783,000 Bonds Payable 26,100,000 10/1/14 Interest Expense ? Discount on Bonds Payable 27,964 Cash 1,305,000 12/31/14 Interest Expense ? Discount on Bonds payable ? Interest Payable ? 3/1/15 Interest Expense ? Interst Payable ? Discount on Bonds Payable ? Cash ? 3/1/15 Bonds Payable 7,200,000 Loss on redemption of Bond ? Discount on bond payable ?

Common Stock

Paid-in Capital in Excess of par common stock

2,376,000

5,464,800

Explanation / Answer

Date Accounting Title Debit Credit April 1 2014 Cash 25,317,000 Discount on Bonds Payable 783,000 Bonds Payable 26,100,000 October, 1 2014 Interest Expense 1332964 Discount on Bonds Payable:(783000/168)*6 27964 Cash: 26100000*10%*6/12 1305000 December, 31 2014 Interest Expense 666482 Discount on Bonds Payable:(783000/168)*3 13982 Interest Payable: 26100000*10%*3/12 652500 March, 01 2015 Interest Expense 444321 Interest Payable 652500 Discount on Bonds Payable:(783000/168)*2 9321 Cash: 652500+ (26100000*10%*2/12) 1087500 March, 01 2015 Bonds Payable 7,200,000 Loss on redemption of Bond (W.N.) 842,657 Discount on bond payable 201,857 Common Stock 2,376,000 Paid-in Capital in Excess of par common stock 5,464,800 Carrying Amount of the retired bonds Bonds Payable 7,200,000 Less: Unamortized Discount: (783000/168)*(168-11)*72/261 -201857 Carrying Value 6,998,143 Loss on Redemption of Bonds Reacquisition Price: 237600*33 7840800 Less: Carrying Amount 6,998,143 Loss on Redemption of Bonds 842,657

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