On July 1, 2020, Davis Corp. issued 10-year, 800 Bonds, Par Value $1,000 each, Bonds carry 10% coupon rate, with interest payable semi-annually on January 1 and July 1. The bonds were issued for $ 908,722. On January 2, 2022, Davis offered to buy back the bonds at 103. Forty percent (40%) of the bondholders accepted the offer. Davis uses the effective-interest method of amortizing premium or discount.

Instructions

a) Prepare the journal entry to record the bond issuance. 2marks

b) Prepare the adjusting entry at December 31, 2020, the end of the fiscal year and the payment on Jan 1, 2021. 2.5marks

c) What is the interest amount Davis will report for the year ended Dec 31, 2021. 1.5marks

d) What is the total cost of borrowing over the life of the bond? 2 marks

e) Show the proper presentation for the Bonds on the Statement of Financial Position (Balance sheet) for Davis co. as of Dec 31, 2021. 1marks

f) Prepare the entry to record the retirement of the bonds for the 40% who accept the offer on January 2, 2022. 3marks

Answer rating: 100% (QA)

a Prepare the journal entry to record the bond issuance Davis Corp Journal Entries Date Particulars ... View the full answer