Question: A Corp issued $1,000,000 face value bonds with a coupon rate of 14% per annum on January 1, 2020. These bonds mature on January 1,

A Corp issued $1,000,000 face value bonds with a coupon rate of 14% per annum on January 1, 2020. These bonds mature on January 1, 2030 and pay interest semi-annually on July 1 and January 1. The effective rate of interest for investors is 12% per annum. Assume the firm uses effective-interest method to calculate the interest expense.

1. Calculate issue price and then prepare the journal entry for the issuance of the bonds.

2. Prepare the journal entry for July 1, 2020.

3. Prepare the journal entry for December 31, 2020.

4. On January 2, 2021, the company retired (redeemed) the bonds at 115. Prepare the journal entry for the retirement (redemption) of the bond.

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