Venezuela Co. is building a new hockey arena at a cost of $2,500,000. It received a downpayment

Question:

Venezuela Co. is building a new hockey arena at a cost of $2,500,000. It received 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-year bonds. These bonds were issued on January 1, 2024, and pay interest annually on each January 1. The bonds yield 10%.


Instructions

a. Prepare the journal entry to record the issuance of the bonds on January 1, 2024.

b. Prepare a bond amortization schedule up to and including January 1, 2028, using the effectiveinterest method.

c. Assume that on July 1, 2027, Venezuela Co. redeems half of the bonds at a cost of $1,065,000 plus accrued interest. Prepare the journal entry to record this redemption.

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Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 9781119790976

18th Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

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