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Issuance and Retirement of Bonds

Venzuela Co. is builing a new hockey areana at a cost of 2,500,000. It recieved a downpayment of 500,000 from local businesses to support the project and now needs to borrow 2,000,000 to complete the project. It therefore decides to issue 2,000,000 of 10.5% 10 yr bonds. These bonds were issued on January 1, 2009, and pay interest annually on each January 1. The bonds yield 10%. Venezuela paid 50,000 in bond issue costs related to the bond sale.

Instructions:

a) Prepare the journal entry to record the issuance of the bonds and the related bond issue costs incurred on January 1, 2009

B) Prepare a bond amortization schedule up to and including Januayr 1, 2013, using the effective interest method

C) Assume that on July 1, 2012 Venzuela Co. retires half of the bonds at a cost of 1,065,000 plus accrued interest. Prepare the journal entry to record this retirement.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9450529

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