On May 1, 2021, MEM Corp. issued $900,000 of 5-year, 7% bonds at 98. The bonds pay
Question:
On May 1, 2021, MEM Corp. issued $900,000 of 5-year, 7% bonds at 98. The bonds pay interest annually on May 1. MEM’s year end is April 30.
Instructions
a. Record the issue of the bonds on May 1, 2021.
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, 2022.
e. Record the interest payment on May 1, 2022.
f. Assuming instead that MEM has a December 31, 2021, year end, prepare the adjusting entry relating to these bonds and the subsequent interest payment on May 1, 2022.
g. Assume that on May 1, 2022, 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?
Step by Step Answer:
a May 1 Cash 900000 98 882000 Bonds Payable 882000 b The market rate of interest on May 1 2021 was 7...View the full answer
Accounting Principles Volume 2
ISBN: 978-1119502555
8th Canadian Edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
