On April 1, 2017, Taylor Corp. sold 12,000 of its $1,000 face value, 15-year, 11% bonds at
Question:
On April 1, 2017, Taylor Corp. sold 12,000 of its $1,000 face value, 15-year, 11% 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, 2018, Taylor extinguished 3,000 of the bonds by issuing 100,000 shares. At this time, the accrued interest was paid in cash to the bondholders whose bonds were being extinguished. In a separate transaction on March 1, 2018, 120,000 of the company's shares sold for $31 per share. Instructions Prepare Taylor Corp.'s journal entries to record the following:
Instructions
(a) April 1, 2017: issuance of the bonds
(b) October 1, 2017: payment of the semi-annual interest
(c) December 31, 2017: accrual of the interest expense
(d) March 1, 2018: extinguishment of 3,000 bonds by the issuance of common shares (no reversing entries are made)
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1119048541
11th Canadian edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy