Summa Manufacturing Company issued $900,000 par value, 5%, 5-year bonds dated January 1, 2018. The bonds pay
Question:
Summa Manufacturing Company issued $900,000 par value, 5%, 5-year bonds dated January 1, 2018. The bonds pay interest semiannually each June 30 and December 31. Summa issued the bonds on April 30, 2018, when the market rate of interest was 6%.
a. Determine the bond issue price including accrued interest on April 30, 2018.
b. Prepare an amortization table for the bond issue using the effective interest rate method.
c. Prepare the journal entries required on the date of issue and on the first two interest dates in 2018, June 30, and December 31.
d. The bonds are retired on June 30, 2020, for $891,000. Prepare the journal entries at retirement.
Step by Step Answer:
a The semiannual interest is 22500 computed as follows Interest payment 900000 x 5 x 22500 semiannually On the date of the bond issue there are four months accrued interest from the date of the bonds ...View the full answer
Intermediate Accounting
ISBN: 978-0134730370
2nd edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
