Question
On January 1, 2018, Surreal Manufacturing issued 660 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually
On January 1, 2018, Surreal Manufacturing issued 660 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 $641,687. Surreal uses the simplified effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year.
Required:
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1. Prepare a bond amortization schedule.
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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.
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. (Do not round intermediate calculations. 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.)
- Record the issuance of 660 bonds at face value of $1,000 each for $641,687.
- Record the interest payment on December 31, 2018.
- Record the interest payment on December 31, 2019.
- Record the interest and face value payment on December 31, 2020.
- Record the retirement of the bonds at a quoted price of 101, assuming the bonds are retired on January 1, 2020.
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