On April 1, 2025, Seminole Company sold 15,000 of its 11%, 15-year, $1,000 face value bonds at

Question:

On April 1, 2025, Seminole Company sold 15,000 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, 2026, Seminole took advantage of favorable prices of its stock to extinguish 6,000 of the bonds by issuing 200,000 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, 2026.


Instructions

Prepare the journal entries needed on the books of Seminole Company to record the following.

a. April 1, 2025: issuance of the bonds.

b. October 1, 2025: payment of semiannual interest.

c. December 31, 2025: accrual of interest expense.

d. March 1, 2026: extinguishment of 6,000 bonds. (No reversing entries made.)

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Intermediate Accounting

ISBN: 9781119790976

18th Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

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