05 Jun Question The following transactions were completed by Monta
Question
The following transactions were completed by Montague Inc., whose fiscal year is the calendar year: 2014 July 1. Issued $55,000,000 of 10-year, 9% callable bonds dated July 1, 2014, at a market (effective) rate of 7%, receiving cash of $62,817,040. Interest is payable semian- nually on December 31 and June 30. Oct. 1. Borrowed $450,000 by issuing a six-year, 8% installment note to Intexicon Bank. The note requires annual payments of $97,342, with the first payment oc- curring on September 30, 2015. Dec. 31. Accrued $9,000 of interest on the installment note. The interest is payable on the date of the next installment note payment. 31. Paid the semiannual interest on the bonds. The bond premium is amortized an- nually in a separate journal entry. 31. Recorded bond premium amortization of $390,852 which was determined using the straight-line method. 31. Closed the interest expense account. 2015 June 30. Paid the semiannual interest on the bonds. The bond premium is amortized annually in a separate journal entry. Sept. 30. Paid the annual payment on the note, which consisted of interest of $36,000 and principal of $61,342. Dec. 31. Accrued $7,773 of interest on the installment note. The interest is payable on the date of the next installment note payment. 31. Paid the semiannual interest on the bonds. The bond premium is amortized annually in a separate journal entry. 31. Recorded bond premium amortization of $781,704, which was determined using the straight-line method. 31. Closed the interest expense account. 2016 June 30. Recorded the redemption of the bonds, which were called at 103. The bal- ance in the bond premium account is $6,253,632 after payment of interest and amortization of premium have been recorded. (Record the redemption only.) Sept. 30. Paid the second annual payment on the note, which consisted of interest of $31,093 and principal of $66,249. Instructions
1. Journalize the entries to record the foregoing transactions.
2. Indicate the amount of the interest expense in (a) 2014 and (b) 2015.
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