On January 1, 2012, Surreal Manufacturing issued 610 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually on December 31, and a maturity date of December 31, 2014. On the issue date, the market interest rate was 4 percent, so the total proceeds from the bond issue were $593,074. Surreal uses the effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year.

Required:

A. Prepare a bond amortization schedule. (Round your answers to the nearest whole dollar amount. Make sure that the carrying value equals face value of the bond in the last period. Interest expense in the last period will result in the amount in discount amortized equaling discount on bonds payable)

Changes during period:

Period ended - (Interestst Expense, Cash Paid, Discount Amortized)

01/01/12 -

12/31/12 -

12/31/13 -

12/31/14 -

Ending Bond Liability Balances - (Bonds Payable, Discount on Bonds Payable, Carrying Value)

01/01/12 -

12/31/12 -

12/31/13 -

12/31/14 -

B. Complete the required journal entries to record the bond issue, interest payments on December 31, 2012 and 2013, interest and face value payment on December 31, 2014, and bond retirement. Assume the bonds are retired on January 1, 2014, at a price of 102.

1. Record the issuance of 610 bonds at face value of $1,000 each for $593,074.

2. Record the interest payment on December 31, 2012.

3. Record the interest payment on December 31, 2013.

4. Record the interest and face value payment on December 31, 2014.

5. Record the retirement of the bonds at a quoted price of 102.