On January 1, 2021, Surreal Manufacturing issued 690 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 $670,855. Surreal uses the 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 101.
On January 1, 2021, Surreal Manufacturing issued 690 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 $670,855. Surreal uses the 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 101.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![On January 1, 2021, Surreal Manufacturing issued 690 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 $670,855. Surreal uses the 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
101.
Complete this question by entering your answers in the tabs below.
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
01/01/21
$
690,000
$
690,000
12/31/21
$
690,000
690,000
12/31/22
690,000
690,000
12/31/23
690,000
690,000
< Req 1
Req 2 to 5 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9bf14da8-d302-4356-8f12-0a8a34ea5954%2F8c681b55-3c56-41cc-bce4-de8e4db30ef9%2Fmnc3ypn_processed.png&w=3840&q=75)
Transcribed Image Text:On January 1, 2021, Surreal Manufacturing issued 690 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 $670,855. Surreal uses the 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
101.
Complete this question by entering your answers in the tabs below.
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
01/01/21
$
690,000
$
690,000
12/31/21
$
690,000
690,000
12/31/22
690,000
690,000
12/31/23
690,000
690,000
< Req 1
Req 2 to 5 >
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