Venzuela Inc. is building a new hockey arena at a cost of $2.5 million. It received a
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(a) Prepare the journal entry to record the issuance of the bonds on January 1, 2014.
(b) Prepare a bond amortization schedule up to and including January 1, 2019, using the effective interest method.
(c) Assume that on July 1, 2017, the company retires half of the bonds at a cost of $1,065,000 plus accrued interest. Prepare the journal entry to record this retirement.
(d) Assume that the costs incurred by Venzuela Inc. to issue the bonds totalled $50,000 as above. If Venzuela Inc. chose to apply the fair value option and thus expense these costs, how would this affect the amount of interest expense that is recognized by Venzuela Inc. each year and over the 10-year term of the bonds in total, compared with its current accounting practice of capitalizing the bond issue costs? Assume that Venzuela would apply the fair value option under IAS 39.
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Related Book For
Intermediate Accounting
ISBN: 978-1118300855
10th Canadian Edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy
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