. on March 1, 2023, Sealy Sundries sold its 5-year, £1,000 face value, 9% bonds dated March 1, 2023, at an effective annual interest rate (yield) of 11%. Interest is payable semiannually, and the first interest payment date is September 1, 2023. Sealy uses the effective-interest method of amortization. The bonds can be called by Sealy at 101 at any time on or after March 1, 2024. Instructions a. 1. How would the selling price of the bond be determined? 2. Specify how all items related to the bonds would be presented in a statement of financial position prepared immediately after the bond issue was sold. b. What items related to the bond issue would be included in Sealy’s 2023 income statement, and how would each be determined? c. Would the amount of bond discount amortization using the effective-interest method of amortization be lower in the second or third year of the life of the bond issue? Why? d. Assuming that the bonds were called in and extinguished on March 1, 2024, how should Sealy report the retirement of the bonds on the 2024 income statement? Q3. On January 1, 2022, Roosevelt Company purchased 12% bonds having a maturity value of $500,000 for $537,907.40. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2022, and mature January 1, 2027, with interest received December 31 of each year. Roosevelt’s business model is to hold these bonds to collect contractual cash flows. Instructions 1. Prepare the journal entry at the date of the bond purchase. 2. Prepare a bond amortization schedule. 3. Prepare the journal entry to record the interest received and the amortization for 2022. 4. Prepare the journal entry to record the interest received and the amortization for 2023.
