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.
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.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 16E
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![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.
Complete this question by entering your answers in the tabs below.
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 (+)/(-) Increase in Bonds Payable, Net.)
Beginning of Year
Changes During the Period
End of Year
Bonds Payable,
Net
Interest
Increase in Bonds
Bonds
Period
Cash Paid
Expense
Payable, Net
Payable, Net
01/01/21 - 12/31/21
$
2$
01/01/22 - 12/31/22
01/01/23 - 12/31/23
< Req 1
Req 2 to 5 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1b1724fd-9117-43fe-9e05-9753d86730d9%2Fa702b518-23de-452e-81b9-d94d6b546743%2Fhbpzes4_processed.png&w=3840&q=75)
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 and the bond retirement. Assume the bonds are retired on January 1, 2023, at a price of
102.
Complete this question by entering your answers in the tabs below.
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 (+)/(-) Increase in Bonds Payable, Net.)
Beginning of Year
Changes During the Period
End of Year
Bonds Payable,
Net
Interest
Increase in Bonds
Bonds
Period
Cash Paid
Expense
Payable, Net
Payable, Net
01/01/21 - 12/31/21
$
2$
01/01/22 - 12/31/22
01/01/23 - 12/31/23
< Req 1
Req 2 to 5 >
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