PA10-6 (Algo) (Supplement 10A) Recording Bond Issue, Interest Payments (Straight-Line Amortization), and Early Bond Retirement [LO 10-S1]

On January 1, 2021, Loop Raceway issued 540 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, 2023. On the issue date, the market interest rate was 7 percent, so the total proceeds from the bond issue were $525,829. Loop uses the straight-line bond amortization method and adjusts for any rounding errors when recording interest in the final year.

Required:

1. Prepare a bond amortization schedule.

Changes during the period Ending Bond Liability

period ended	cash paid	discount amortized	interest expense	bonds payable	discount on bonds payable	carrying value
1/1/21
12/31/21
12/31/22
12/31/23

2-5. Prepare the journal entries to record the bond issue, the interest payments on December 31, 2021 and 2022, the interest and face value payment on December 31, 2023 and the bond retirement. Assume the bonds are retired on January 1, 2023, at a price of 97.

1- Record the issuance of 540 bonds at face value of $1,000 each for $525,829.

2- Record the interest payment on December 31, 2021.

3- Record the interest payment on December 31, 2022.

4- Record the interest and face value payment on December 31, 2023.

5-Record the retirement of the bonds at a quoted price of 97, assuming the bonds are retired on January 1, 2023.