On January 1, 2015, Surreal Manufacturing issued 590 bonds, each with a face val

Question

On January 1, 2015, 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, 2017. 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: 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.)

Explanation / Answer

Surreal Manufacturing Bond amortization schedule : effective interest method Journal entry components Balance sheet accounts (a) (b) c = (b)-(a) (d) (e) (f=(d-e) Period ended Cash paid Interest expenses Amortized discount Bonds payable Discount on bonds payable Carrying value 1/1/2009 590000 16371 573629 12/31/2009 17700 22945 5245 590000 11126 578874 12/31/2010 17700 23155 5455 590000 5671 584329 12/31/2011 17700 23373 5673 590000 0 590000

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