Accounting for bonds using amortized cost measurement based on the historical market interest rate. Several years ago, Huergo Dooley Corporation (HDC) issued $2,000,000 face value, 8% semiannual coupon bonds on the market initially priced to yield 10% compounded semiannually. The bonds require HDC to make semiannual payments of 4% of face value on June 30 and December 31 of each year. The bonds mature on December 31, 2012.

a. Compute the carrying value of these bonds on January 1, 2008, assuming that HDC has used amortized cost measurement based on the historical market interest rate to account for these bonds.

b. Give HDC’s journal entry to recognize interest expense and cash payment on June 30, 2008.

c. Give HDC’s journal entry to recognize interest expense and cash payment on December 31, 2008.

d. On January 1, 2009, these bonds trade in the market at a price to yield 6%, compounded semiannually. On this date, HDC repurchased 20% of these bonds on the open market and retired them. Give the journal entry to record the repurchase.