According to the Long-Term Debt Note in Its Annual Report,the

question 165

Essay

According to the long-term debt note in its annual report,the Modern Journal Company,publisher of the West End Times,Technotes,and other publications,engaged in the following long-term debt transactions in 2010:
1.On April 1,2010,the company issued $50,000,000 of ten-year,8 1/4 percent notes with semiannual interest payments on April 1 and October 1 at face value.
2.On October 15,2010,the company redeemed,prior to maturity dates,all of its outstanding 10 percent notes that had been issued in connection with the acquisition of E-Reporter Newspapers,Inc.The redemption price was $32,500,000 plus accrued interest.The carrying value of the notes on October 15 was $32,500,000 less an unamortized discount of $3,611,500.The semiannual interest dates were June 15 and December 15.
3.On December 8,2010,the company issued $50,000,000 of 8 percent notes due on December 15,ten years later,with semiannual interest payments on June 15 and December 15.The notes were issued at face value plus accrued interest.
(Note: Long-term notes are accounted for in a manner similar to that for bonds.Round answers to nearest dollar)
"a.Prepare entries in journal form to record the three transactions described above.
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"b.Prepare the entries on the interest payment dates of October 1 and December 15,2010,and the year-end adjustment on December 31,2010.
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c.What was the total interest expense during 2010 for the three long-term notes issued,assuming that the balance in Unamortized Discount was $3,746,500 at the beginning of the year? Assume the balance of the outstanding notes in transaction 2 above was $32,500,000 at the beginning of the year.

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