Question

On March 1, 2017, Oriole Company sold 24,600 of its 7%, 20-year, $1,000 face value bonds at 97. Interest payment dates are March 1 and September 1, and the company uses the straight-line method of bond discount amortization. On February 1, 2018, Oriole took advantage of favorable prices of its stock to extinguish 2,850 of the bonds by issuing 150,700 shares of its $1 par value common stock. At this time, the accrued interest was paid in cash. The company’s stock was selling for $19.25 per share on February 1, 2018.

Prepare the journal entries needed on the books of Oriole Company to record the following. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 38,548.)

(a)		March 1, 2017: issuance of the bonds.
(b)		September 1, 2017: payment of semiannual interest.
(c)		December 31, 2017: accrual of interest expense.
(d)		February 1, 2018: extinguishment of 2,850 bonds. (No reversing entries made.)

Date	Account Titles and Explanation	Debit	Credit
3/1/17	enter an account title for the journal entry on January 3 in 2017	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 3 in 2017	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 3 in 2017	enter a debit amount	enter a credit amount
9/1/17	enter an account title for the journal entry on January 9 in 2017	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 9 in 2017	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on January 9 in 2017	enter a debit amount	enter a credit amount
12/31/17	enter an account title for the journal entry on December 31 in 2017	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31 in 2017	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31 in 2017	enter a debit amount	enter a credit amount
2/1/18	enter an account title to record payment of interest on February 1 in 2018	enter a debit amount	enter a credit amount
	enter an account title to record payment of interest on February 1 in 2018	enter a debit amount	enter a credit amount
	enter an account title to record payment of interest on February 1 in 2018	enter a debit amount	enter a credit amount
	enter an account title to record payment of interest on February 1 in 2018	enter a debit amount	enter a credit amount
	(To record payment of interest)
2/1/18	enter an account title to record extinguishment of the bonds on February 1 in 2018	enter a debit amount	enter a credit amount
	enter an account title to record extinguishment of the bonds on February 1 in 2018	enter a debit amount	enter a credit amount
	enter an account title to record extinguishment of the bonds on February 1 in 2018	enter a debit amount	enter a credit amount
	enter an account title to record extinguishment of the bonds on February 1 in 2018	enter a debit amount	enter a credit amount
	enter an account title to record extinguishment of the bonds on February 1 in 2018	enter a debit amount	enter a credit amount
	(To record extinguishment of the bonds)

Answer 1

Date	Particular	Debit	Credit
3/1/2017	Cash(24600000*97%)	$ 23,862,000
	Discount on bonds payable(24600000*3%)	$        738,000
	Bonds payable(24600*1000)		$   24,600,000
9/1/2017	Interest expense	$        879,450
	Discount on bonds payable(738000/40)		$           18,450
	Cash(24600000*7%/2)		$         861,000
12/31/2017	Interest expense	$        586,300
	Discount on bonds payable(738000/20*4/12)		$           12,300
	Interest Payable(24600000*7%*4/12)		$         574,000
2/1/2018	Interest payable(574000/24600)*2850/2	$           33,250
	Interest expense	$           66,738
	Discount on bonds payable(2850*1*1/12)		$                 238
	Cash(2850*1000*7%/2)		$           99,750
2/1/2018	Bonds payable(2850*1000)	$     2,850,000
	Loss on redemption of bonds	$        105,363
	Discount on bonds payable		$           54,388
	Common Stock(150700*1)		$         150,700
	Paid in capital above par(150700*(19.25-1))		$     2,750,275