On April 1, 2011, Tran Corporation issued $20 million of 8% bonds, with interest payable on March

Question:

On April 1, 2011, Tran issued $20 million of 8% bonds, with interest payable on March 31 and September 30 each year. The market yield rate for these bonds on the date of issuance was 6%. The bonds were dated April 1, 2011, and had a date of April 1, 2021. The company's fiscal year end is December 31.
Required:
a. Calculate the cash proceeds from the issuance of these bonds.
b. Prepare the journal entries made by the company on April 1, September 30, and December 31, 2011, and on March 31, 2012.
c. On April 1, 2012, the company retired the bonds by purchasing them on the open market at 101 (i.e., at 101% of their face value). Prepare the journal entry (or entries) required to record the early retirement of the bonds.
d. Explain how a company could record a gain on the early retirement of its bonds even though the amount it paid to repurchase them was more than their face value. Corporation
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