On January 1, 2018, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000, a stated interest rate of 6 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 5.50 percent, so the total proceeds from the bond issue were $101,347. Methodical uses the straight-line bond amortization method and adjusts for any rounding errors when recording interest in the final year.

Required:

1. 1. Prepare a bond amortization schedule.
2. 2-5. Prepare the required journal entries to record the bond issue, interest payments on December 31, 2018 and 2019, the interest and face value payment on December 31, 2020 and the bond retirement. Assume the bonds are retired on January 1, 2020, at a price of 103.

• Req 1
• Req 2 to 5

Prepare a bond amortization schedule.

	Changes During the Period			Ending Bond Liability Balances
Period Ended	Cash Paid	Premium Amortized	Interest Expense	Bonds Payable	Premium on Bonds Payable	Carrying Value
01/01/18						$0
12/31/18			0			0
12/31/19			0			0
12/31/20			0			0

• Record the issuance of 100 bonds at face value of $1,000 each for $101,347.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Jan 01, 2018		101,347
	Premium on Bonds Payable		1,000

• Record the interest payment on December 31, 2018.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Dec 31, 2018	Interest Expense
	Bonds Payable
	Cash

• Record the interest payment on December 31, 2019.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Dec 31, 2019	Interest Expense
	Bonds Payable
	Cash

• Record the interest and face value payment on December 31, 2020.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Dec 31, 2020	Interest Expense
	Bonds Payable
	Cash

• Record the retirement of the bonds at a quoted price of 103, assuming the bonds are retired on January 1, 2020.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Jan 01, 2020