On February 1, 2021, Cromley Motor Products issued 9% bonds, dated February 1, with a face amount of $80 million. The bonds mature on January 31, 2025 (4 years). The market yield for bonds of similar risk and maturity was 10%. Interest is paid on July 31 and January 31. The fiscal year for the firm ends on December 31. A. Determine the price of the bonds issued on February 1. B. Prepare the amortization schedule for the bonds using the effective interest rate method. C. Prepare the journal entries to record: • Issuing bonds on February 1 • Paying interest on July 31, 2021 • Adjusting entry for Dec 31, 2021 • Payment of Interest on January 31, 2022 • Repayment of the bonds on January 31, 2025. (Note – do not forget about the adjusting entry in December of 2024)

On February 1, 2021, Cromley Motor Products issued 9% bonds, dated February 1, with a face amount of $80 million. The bonds mature on January 31, 2025 (4 years). The market yield for bonds of similar risk and maturity was 10%. Interest is paid on July 31 and January 31. The fiscal year for the firm ends on December 31. A. Determine the price of the bonds issued on February 1. B. Prepare the amortization schedule for the bonds using the effective interest rate method. C. Prepare the journal entries to record: • Issuing bonds on February 1 • Paying interest on July 31, 2021 • Adjusting entry for Dec 31, 2021 • Payment of Interest on January 31, 2022 • Repayment of the bonds on January 31, 2025. (Note – do not forget about the adjusting entry in December of 2024)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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