Question
On May 1, 2021, Sanford & Son issued 10% bonds dated May 1, 2021, with a face amount of $200,000. The bonds sold for a
On May 1, 2021, Sanford & Son issued 10% bonds dated May 1, 2021, with a face amount of $200,000. The bonds sold for a price to yield the market rate of 8% and mature in 20 years. Interest is paid semiannually on October 31 and April 30. Sanford & Son's fiscal year is the calendar year.
Determine the price of the bonds issued on May 1, 2021. Explain how you compute the price.
Prepare the journal entry to record the bond issuance on May 1, 2021
Prepare the journal entry on October 31, 2021 (1st payment), using the effective interest method.
Prepare the necessary adjusting entry on December 31, 2021
Assume all bonds are retired at 102.5 on April 30, 2022 right after the second payment.
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