Assume the same facts as PA10-7, except that Surreal uses the simplified effective-interest bond amortization method, as

Question:

Assume the same facts as PA10-7, except that Surreal uses the simplified effective-interest bond amortization method, as shown in Chapter Supplement 10C.


Data From PA10-7

On January 1, 2018, Surreal Manufacturing issued 600 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 $583,352. 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. Give the journal entry to record the bond issue.
3. Give the journal entries to record the interest payments on December 31, 2018 and 2019.
4. Give the journal entry to record the interest and face value payment on December 31, 2020.
5. Assume the bonds are retired on January 1, 2020, at a price of 101. Give the journal entry to record the bond retirement.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Fundamentals Of Financial Accounting

ISBN: 9781265440169

7th Edition

Authors: Fred Phillips, Shana Clor Proell, Robert Libby, Patricia Libby

Question Posted: