On May 1, 2021, Sunland Corp. issued $870,000 of 5-year, 7% bonds at 96. The bonds...

On May 1, 2021, Sunland Corp. issued $870,000 of 5-year, 7% bonds at 96. The bonds pay interest annually on May 1. Sunland's year end is April 30.

Record the issue of the bonds on May 1, 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
May 1

Calculate the effective rate of the bonds using Excel or a financial calculator. (Round answer to 4 decimal places, e.g. 1.5751.)

Effective rate

Prepare an effective interest amortization table for this bond. (Round answers to 0 decimal places, e.g. 5,276.)

Sunland CORP. Bond Discount Amortization Table Effective Interest Method—Annual Interest Payments
Date	Interest Payment	Interest Expense	Discount Amortization	Bond Amortized Cost
May 1, 2021	$	$	$	$
May 1, 2022
May 1, 2023
May 1, 2024
May 1, 2025
May 1, 2026

Record the accrual of interest at April 30, 2022.

Date	Account Titles and Explanation	Debit	Credit
Apr. 30


	(To accrue interest expense.)

May 1

	(To record interest payment.)

Date	Account Titles and Explanation	Debit	Credit
May 1


	(To record redemption of bonds.)

Solutions

Expert Solution

Date	General Journal	Debit	Credit
31 May 2021	Cash (870000 * 96/100)	$835200
	Discount on Issue of Bonds	$34800
	7% Bonds Payable		$870000
	To Record Issue of Bond on Discount

2. Effective Interest rate = '=Rate(nper,pmt,pv,fv)"

nper = number of periods = 5 years

pmt = annual coupon = $43500 (870000*5%)

pv = issue price = -$835200

fv = redemption value = $870000

Effective Interest rate = '=Rate(5,43500,-835200,870000)" = 5.9482%

Date	General Journal	Debit	Credit
Apr 30 2022	Interest Expense	$49680
	Interest Payable		$43500
	Discount on Bonds Payable		$6180

Date	General Journal	Debit	Credit
May 1 2022	Interest Payable	$43500
	Cash		$43500

Date	General Journal	Debit	Credit
May 1 2026	7% Bonds Payable	$870000
	Interest Payable	$43500
	Cash		$913500

ekkarill92 answered 1 year ago

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