Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2018, Surreal Manufacturing issued 580 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually

image text in transcribed
image text in transcribed
image text in transcribed
On January 1, 2018, Surreal Manufacturing issued 580 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, 2020. On the issue date, the market interest rate was 4 percent, so the total proceeds from the bond issue were $563,907. Surreal uses the effective interest bond amortization method and adjusts for any rounding errors when recording interest in the final year. Required: 1. Prepare a bond amortization schedule. 2-5. Prepare the journal entries to record the bond issue, the 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 101. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 to 5 Prepare the journal entries to record the bond issue, the 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 101. (IF no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Round your answers to the nearest whole dollar amount.) Show less 1 Record the issuance of 580 bonds at face value of $1,000 each for $563,907. 2 Record the interest payment on December 31, 2018. 3 Record the interest payment on December 31, 2019. 4 Record the interest and face value payment on December 31, 2020. bit 5 Record the retirement of the bonds at a quoted price of 101, assuming the bonds are retired on January 1, 2020. Show less No Date General Journal Debit Credit 1 Jan 01, 2018 Cash Discount on Bonds Payable Bonds Payable 563,907 16,093 580,000 2 Dec 31, 2018 22,556 Interest Expense Discount on Bonds Payable Cash 5, 156 17,400 3 Dec 31, 2019 2.256 Interest Expense Discount on Bonds Payable Cash 5,156 17,400 4 Dec 31, 2020 22.763 X Interest Expense Discount on Bonds Payable Cash 5.363 X 17.400 5 Jan 01, 2020 580,000 Bonds Payable Gain on Bond Retirement Discount on Bonds Payable Cash O 6,154 5,574 580,580

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Internal Auditing Handbook

Authors: K. H. Spencer Pickett

3rd Edition

0470518715, 978-0470518717

More Books

Students also viewed these Accounting questions