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Prepare a report interest payable and bonds payable

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On March 1, 2020, Sunray Management Ltd. issues 12.5 percent, 20-year bonds payable with a maturity value of $6,750,000. The bonds pay interest on February 28 and August 31. Sunray Management Ltd. amortizes premiums and discounts by the straight-line method.

Question 1: If the market interest rate is 11.5 percent when Sunray Management Ltd. issues its bonds, will the bonds be priced at par, at a premium, or at a discount? Explain.

Question 2: If the market interest rate is 13 percent when Sunray Management Ltd. issues its bonds, will the bonds be priced at par, at a premium, or at a discount? Explain.

Question 3: Assume that the issue price of the bonds is 97.00. Journalize the following bond transactions:

a. Issuance of the bonds on March 1, 2020.

b. Payment of interest and amortization of the discount on August 31, 2020.

c. Accrual of interest and amortization of the discount on December 31, 2020, Sunray Management Ltd.'s year end.

d. Payment of interest and amortization of the discount on February 28, 2021.

Question 4: Report interest payable and bonds payable as they would appear on theSunray Management Ltd. balance sheet at December 31 2020..

Reference no: EM132497886

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