Question
On May 1, 2021,SandhillCorp. issued $940,000of 5-year,7% bonds at95. The bonds pay interest annually on May 1.Sandhill's year end is April 30. a. Record the
On May 1, 2021,SandhillCorp. issued $940,000of 5-year,7% bonds at95. The bonds pay interest annually on May 1.Sandhill's year end is April 30.
a. Record the issue of the bonds on May 1, 2021.
b. Calculate the effective rate of the bonds using Excel or a financial calculator.
c. n effective interest amortization table for this bond.
SandhillCORP.
Bond Discount Amortization Table
Effective Interest MethodAnnual Interest PaymentsDate
Interest Payment Interest Expense Discount Amortization Bond Amortized Cost
May 1, 2021
May 1, 2022
May 1, 2023
May 1, 2024
May 1, 2025
May 1, 2026
d. Record the accrual of interest at April 30, 2022.
e. Record the interest payment on May 1, 2022.
f. Assuming instead thatSandhillhas a December 31, 2021, year end, prepare the adjusting entry relating to these bonds and the subsequent interest payment on May 1, 202Date
Account Titles and Explanation Debit Credit
Dec. 31
(To accrue interest expense.)
May 1
(To record interest payment)
g. Assume that on May 1, 2022, after payment of the interest,Sandhillredeems all of the bonds at101. Record the redemption of the bonds.
Date Account Titles and Explanation Debit Credit
May 1
(To record redemption of bonds.)
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Financial Reporting And Analysis
Authors: Lawrence Revsine, Daniel Collins
4th Edition
0073527092, 978-0073527093
