P14-7
(Entries for Life Cycle of Bonds) On April 1, 2007, Fontenot Company sold 12,000 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, 2008, Fontenot took advantage of favorable prices of its stock to extinguish 3,000 of the bonds by issuing 100,000 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, 2008. Instructions Prepare the journal entries needed on the books of Fontenot Company to record the following. (a) April 1, 2007: issuance of the bonds. (b) October 1, 2007: payment of semiannual interest. (c) December 31, 2007: accrual of interest expense. (d) March 1, 2008: extinguishment of 3,000 bonds. (No reversing entries made.)
No comments:
Post a Comment