On May 1, 2017, MEM Corp. issued $900,000 of 5-year, 7% bonds at 98. The bonds pay
Question:
Instructions
(a) Record the issue of the bonds on May 1, 2017.
(b) Calculate the effective rate of the bonds using Excel or a financial calculator.
(c) Prepare an effective interest amortization table for this bond.
(d) Record the accrual of interest at April 30, 2018.
(e) Record the interest payment on May 1, 2018.
(f) Assuming instead that MEM has a December 31, 2017, year end, prepare the adjusting entry relating to these bonds and the subsequent interest payment on May 1, 2018.
(g) Assume that on May 1, 2018, after payment of the interest, MEM redeems all of the bonds at 104. Record the redemption of the bonds.
TAKING IT FURTHER
Why would MEM elect to redeem the bonds early?
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2017 a May 1 Cash 900000 98 882000 Bonds Payable 882000 b The market rate of interest on May 1 2017 ...View the full answer
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Related Book For 
Accounting Principles
ISBN: 978-1119048473
7th Canadian Edition Volume 2
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
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