Question
Sunland Cars Co. issued $2.02 million of 6%, 5-year bonds on January 1, 2021. The bonds were dated January 1 and pay interest annually. The
Sunland Cars Co. issued $2.02 million of 6%, 5-year bonds on January 1, 2021. The bonds were dated January 1 and pay interest annually. The bonds are secured with real estate holdings. The market interest rate was 5% for these bonds. Sunland has a calendar year end.?
a) Calculate the price of the bonds. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 0 decimal places, e.g. 1,575.)
Price of the bonds | $ |
b) Record the bond issue. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date | Account Titles and Explanation | Debit | Credit |
Jan. 1, 2021 | |||
(To record issuance of bonds.) |
c) Prepare an effective interest amortization table for these bonds. (Round answers to 0 decimal places, e.g. 5,275.)
SUNLAND CARS CO. Bond Premium Amortization Table Effective Interest MethodAnnual Interest Payments 6% Bonds Issued at market rate of 5% | ||||||||
Date | Interest Payment | Interest Expense | Premium Amortization | Bond Amortized Cost | ||||
Jan. 1, 2021 | $ | $ | $ | $ | ||||
Jan. 1, 2022 | ||||||||
Jan. 1, 2023 | ||||||||
Jan. 1, 2024 | ||||||||
Jan. 1, 2025 | ||||||||
Jan. 1, 2026 |
d) Journalize the first three interest payments assuming reversing entries have been used. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date | Account Titles and Explanation | Debit | Credit |
Jan. 1, 2022 | |||
(To record interest payment.) | |||
Jan. 1, 2023 | |||
(To record interest payment.) | |||
Jan. 1, 2024 | |||
(To record interest payment.) |
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