(Entries for Life Cycle of Bonds) On April 1, 2010, Seminole Company sold 15,000 of its 11%,...

Question:

(Entries for Life Cycle of Bonds) On April 1, 2010, 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, 2011, 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, 2011.

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

(a) April 1, 2010: issuance of the bonds.

(b) October 1, 2010: payment of semiannual interest.

(d) March 1, 2011: extinguishment of 6,000 bonds. (No reversing entries made.)

Bonds
When companies need to raise money, issuing bonds is one way to do it. A bond functions as a loan between an investor and a corporation. The investor agrees to give the corporation a specific amount of money for a specific period of time in exchange... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...