Metro Inc. issued $200,000 of 10% bonds dated May 1, 2021 for $239,588. The bonds mature in 20 years. The effective interest rate for these bonds was 8%. Interest is paid semiannually on October 31 and April 30. Metro's fiscal year is the calendar year. Metro uses the effective interest method of amortization. Required: 1. Prepare the journal entry to record the bond issuance on May 1, 2021. 2. Prepare the necessary journal entry on October 31, 2021 (1st payment). 3. Prepare the adjusting entry for the accrued interest (for 2 months) on December 31, 2021
Metro Inc. issued $200,000 of 10% bonds dated May 1, 2021 for $239,588. The bonds
mature in 20 years. The effective interest rate for these bonds was 8%. Interest is paid
semiannually on October 31 and April 30. Metro's fiscal year is the calendar year. Metro uses the
effective interest method of amortization.
Required:
1. Prepare the
2. Prepare the necessary journal entry on October 31, 2021 (1st payment).
3. Prepare the
Bond is financial investment securities where investors lend money to a person. Interest and installments are payable on such securities as per Agreement of both parties. It is asset for lender and liability for issuer.
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