On May 1, 2011, MEM Corp. issued $800,000 of five-year, 6% bonds at 100. The bonds pay interest semi-annually on November 1 and May 1. MEM’s year end is December 31 and it makes adjusting entries annually.
Instructions
(a) Identify the and market rates of interest on May 1, 2011, when MEM issued the bonds.
(b) Record the issue of the bonds on May 1, 2011.
(c) Record the first interest payment on November 1, 2011.
(d) Prepare the adjusting entry to record the accrual of interest on December 31, 2011.
(e) Record the second interest payment on May 1, 2012.
(f) Assume that on May 1, 2012, immediately after paying the semi-annual interest, MEM redeems all of the bonds at 98. Record the redemption of the bonds.
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