On January 1, 2018, Surreal Manufacturing issued 660 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 4 percent, so the total proceeds from the bond issue were $641,687. Surreal uses the effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year. Required: 1. Make a bond amortization schedule. 2-5. Make the journal entries to record the bond issue, the interest payments on December 31, 2018 and 2019, the 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 101. Part 1 Required 1 in image attached!

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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PART 1

On January 1, 2018, Surreal Manufacturing issued 660 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 4 percent, so the total proceeds from the bond issue were $641,687. Surreal uses the effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year.

Required:

  1. 1. Make a bond amortization schedule.
  2. 2-5. Make the journal entries to record the bond issue, the interest payments on December 31, 2018 and 2019, the 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 101.

Part 1 Required 1 in image attached!

Required 2 to 5

 

Make the journal entries to record the bond issue, the interest payments on December 31, 2018 and 2019, the 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 101. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Round your answers to the nearest whole dollar amount.)

 

Journal entry worksheet

  • Record the issuance of 660 bonds at face value of $1,000 each for $641,687. (Note: Enter debits before credits.)

Date General Journal Debit Credit

Jan 01, 2018 [ ] [ ] [ ]

 

  • Record the interest payment on December 31, 2018. (Note: Enter debits before credits.)

Date General Journal Debit Credit

Dec 31, 2018 [ ] [ ] [ ]

 

  • Record the interest payment on December 31, 2019. (Note: Enter debits before credits.)

Date General Journal Debit Credit

Dec 31, 2019 [ ] [ ] [ ]

 

  • Record the interest and face value payment on December 31, 2020. (Note: Enter debits before credits.)

Date General Journal Debit Credit

Dec 31, 2020 [ ] [ ] [ ]

 

  • Record the retirement of the bonds at a quoted price of 101, assuming the bonds are retired on January 1, 2020. (Note: Enter debits before credits.)

Date General Journal Debit Credit

Jan 1, 2020 [ ] [ ] [ ]

 

PART 2

 

On January 1, 2018, Surreal Manufacturing issued 560 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 4 percent, so the total proceeds from the bond issue were $544,462. Surreal uses the simplified effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year.

 

Required:

  1. 1. Make a bond amortization schedule.
  2. 2-5. Make the journal entries to record the bond issue, the interest payments on December 31, 2018 and 2019, the 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 103.

 

Part 2 Required 1 in image attached!

Required 2 to 5

 

Prepare the journal entries to record the bond issue, the interest payments on December 31, 2018 and 2019, the 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 103. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Round your answers to the nearest whole dollar.)

 

Journal entry worksheet

  • Record the issuance of 560 bonds at face value of $1,000 each for $544,462. (Note: Enter debits before credits.)

Date General Journal Debit Credit

Jan 01, 2018 [ ] [ ] [ ]

 

  • Record the interest payment on December 31, 2018. (Note: Enter debits before credits.)

Date General Journal Debit Credit

Dec 31, 2018 [ ] [ ] [ ]

 

  • Record the interest payment on December 31, 2019. (Note: Enter debits before credits.)

Date General Journal Debit Credit

Dec 31, 2019 [ ] [ ] [ ]

 

  • Record the interest and face value payment on December 31, 2020. (Note: Enter debits before credits.)

Date General Journal Debit Credit

Dec 31, 2020 [ ] [ ] [ ]

 

  • Record the retirement of the bonds at a quoted price of 103, assuming the bonds are retired on January 1, 2020. (Note: Enter debits before credits.)

Date General Journal Debit Credit

Jan 01, 2020 [ ] [ ] [ ]

Req 1
Req 2 to 5
Prepare a bond amortization schedule. (Do not round intermediate calculations. Round your answers to the nearest whole
dollar. Make sure that the Carrying value equals to face value of the bond in the last period. Interest expense in the last
period should be calculated as Cash Interest (+)/(-) Reduction in Bonds Payable, Net.)
Beginning of
Year
Changes During the Period
End of Year
Bonds
Interest
Increase in Bonds
Bonds
Period
Cash Paid
Payable, Net
Expense
Payable, Net
Payable, Net
01/01/18 - 12/31/18
$
2$
01/01/19 - 12/31/19
01/01/20 - 12/31/20
< Req 1
Req 2 to 5 >
Transcribed Image Text:Req 1 Req 2 to 5 Prepare a bond amortization schedule. (Do not round intermediate calculations. Round your answers to the nearest whole dollar. Make sure that the Carrying value equals to face value of the bond in the last period. Interest expense in the last period should be calculated as Cash Interest (+)/(-) Reduction in Bonds Payable, Net.) Beginning of Year Changes During the Period End of Year Bonds Interest Increase in Bonds Bonds Period Cash Paid Payable, Net Expense Payable, Net Payable, Net 01/01/18 - 12/31/18 $ 2$ 01/01/19 - 12/31/19 01/01/20 - 12/31/20 < Req 1 Req 2 to 5 >
Req 1
Req 2 to 5
Prepare a bond amortization schedule. (Round your answers to the nearest whole dollar. Make sure that the Carrying value equals
face value of the bond in the last period. Interest expense in the last period will result in the amount in Discount Amortized
equaling Discount on Bonds Payable.)
Changes During the Period
Ending Bond Liability Balances
Period
Interest
Discount
Discount on
Cash Paid
Bonds Payable
Carrying Value
Ended
Expense
Amortized
Bonds Payable
01/01/18
$
12/31/18
12/31/19
12/31/20
< Req 1
Req 2 to 5 >
Transcribed Image Text:Req 1 Req 2 to 5 Prepare a bond amortization schedule. (Round your answers to the nearest whole dollar. Make sure that the Carrying value equals face value of the bond in the last period. Interest expense in the last period will result in the amount in Discount Amortized equaling Discount on Bonds Payable.) Changes During the Period Ending Bond Liability Balances Period Interest Discount Discount on Cash Paid Bonds Payable Carrying Value Ended Expense Amortized Bonds Payable 01/01/18 $ 12/31/18 12/31/19 12/31/20 < Req 1 Req 2 to 5 >
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