PA10-7 (Algo) (Supplement 10B) Recording Bond Issue, Interest Payments (Effective-Interest Amortization), and Early Bond Retirement [LO 10-S2] On January 1, 2021, Surreal Manufacturing issued 590 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 $573,629. 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 103.
PA10-7 (Algo) (Supplement 10B) Recording Bond Issue, Interest Payments (Effective-Interest Amortization), and Early Bond Retirement [LO 10-S2] On January 1, 2021, Surreal Manufacturing issued 590 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 $573,629. 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 103.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Rr.1.
![PA10-7 (Algo) (Supplement 10B) Recording Bond Issue, Interest Payments (Effective-Interest
Amortization), and Early Bond Retirement [LO 10-S2]
On January 1, 2021, Surreal Manufacturing issued 590 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 $573,629. 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 103.
X Answer is complete but not entirely correct.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1f5f35a5-6214-459c-90d2-e26e8084ab69%2F12081929-09da-4528-9683-13fe665d5c6e%2Fg5ie0mo_processed.png&w=3840&q=75)
Transcribed Image Text:PA10-7 (Algo) (Supplement 10B) Recording Bond Issue, Interest Payments (Effective-Interest
Amortization), and Early Bond Retirement [LO 10-S2]
On January 1, 2021, Surreal Manufacturing issued 590 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 $573,629. 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 103.
X Answer is complete but not entirely correct.
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