On January 1, 2021, Surreal Manufacturing issued 540 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, 2023. On the issue date, the market interest rate was 4 percent, so the total proceeds from the bond issue were $525,017. Surreal uses the simplified effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year. Required: 1. Prepare a bond amortization schedule. 2-5. Prepare the journal entries to record the bond issue, the interest payments on December 31, 2021 and 2022, the interest and face value payment on December 31, 2023 and the bond retirement. Assume the bonds are retired on January 1, 2023, at a price of 102. Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 5 Prepare the journal entries to record the bond issue, the interest payments on December 31, 2021 and 2022, the interest and face value payment on December 31, 2023 and the bond retirement. Assume the bonds are retired on January 1, 2023, at a price of 102. (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.)
On January 1, 2021, Surreal Manufacturing issued 540 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, 2023. On the issue date, the market interest rate was 4 percent, so the total proceeds from the bond issue were $525,017. Surreal uses the simplified effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year. Required: 1. Prepare a bond amortization schedule. 2-5. Prepare the journal entries to record the bond issue, the interest payments on December 31, 2021 and 2022, the interest and face value payment on December 31, 2023 and the bond retirement. Assume the bonds are retired on January 1, 2023, at a price of 102. Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 5 Prepare the journal entries to record the bond issue, the interest payments on December 31, 2021 and 2022, the interest and face value payment on December 31, 2023 and the bond retirement. Assume the bonds are retired on January 1, 2023, at a price of 102. (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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:On January 1, 2021, Surreal Manufacturing issued 540 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, 2023. On the issue date, the market interest rate was 4 percent, so the total proceeds from the bond issue were $525,017. Surreal uses the simplified effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year.
**Required:**
1. Prepare a bond amortization schedule.
2-5. Prepare the journal entries to record:
- The bond issue
- The interest payments on December 31, 2021 and 2022
- The interest and face value payment on December 31, 2023
- The bond retirement. Assume the bonds are retired on January 1, 2023, at a price of 102.
**Instructions:**
- The problem includes a section where answers can be entered.
- Use the available tabs (Req 1, Req 2 to 5) for the corresponding tasks.
- 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.
Transcribed Image Text:### General Journal Entries
This table represents a series of financial transactions related to bonds, detailing the journal entries over specific dates. Each entry records the debit and credit amounts along with the involved accounts.
#### Transactions:
1. **January 01, 2021**
- **Cash**: Debit of 525,017
- **Bonds Payable, Net**: Credit of 525,017
2. **December 31, 2021**
- **Interest Expense**: Debit of 21,001
- **Bonds Payable, Net**: Credit of 4,801
- **Cash**: Credit of 16,200
3. **December 31, 2022**
- **Interest Expense**: Debit of 21,193
- **Bonds Payable, Net**: Credit of 4,993
- **Cash**: Credit of 16,200
4. **December 31, 2022**
- **Interest Expense**: Debit of 21,390
- **Bonds Payable, Net**: Credit of 5,190 (Error indicated)
- **Cash**: Credit of 16,200 (Error indicated)
5. **January 01, 2023**
- **Bonds Payable, Net**: Debit
- **Loss on Bond Retirement**: Debit
- **Cash**: Credit
The table indicates a discrepancy in the figures with a red mark beside the credits on December 31, 2022, suggesting an error in those entries.
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