On January 1, 2018, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000, a stated interest rate of 8 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 7.25 percent, so the total proceeds from the bond issue were $101,959. Methodical uses the effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year. Prepare the journal entry to record the bond issue, interest payments on December 31, 2018 and 2019, interest and face value payment on December 31, 2020 and the bond retirement. Assume the bonds are retired on January 1, 2020, at a price of 102.

On January 1, 2018, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000, a stated interest rate of 8 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 7.25 percent, so the total proceeds from the bond issue were $101,959. Methodical uses the effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year. Prepare the journal entry to record the bond issue, interest payments on December 31, 2018 and 2019, interest and face value payment on December 31, 2020 and the bond retirement. Assume the bonds are retired on January 1, 2020, at a price of 102.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 6PA: Aggies Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1,...

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