Question
On January 1, 2015, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000, a stated interest rate of 8 percent paid annually
On January 1, 2015, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000, a stated interest rate of 8 percent paid annually on December 31, and a maturity date of December 31, 2017. On the issue date, the market interest rate was 7.25 percent, so the total proceeds from the bond issue were $101,959. Methodical uses the effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year.
Prepare a bond amortization schedule including date, interest expense, cash paid, amortized premium or discount, remaining premium or discount, and carrying value.
Prepare the journal entry to record the bond issue, interest payments on December 31, 2015 and 2016, interest and face value payment on December 31, 2017 and the bond retirement. Assume the bonds are retired on January 1, 2017, at a price of 102.
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