LO #2 - Question 1: Bonds - Effective Interest Method (17 marks) On January 1, 2021, Magnus Manufacturing Inc., a company following IFRS, sold 5-year bonds. The bonds were dated January 1, 2021. Interest is paid semi-annually on January 1 and July 1 each year. On May 1, 2023, Magnus purchased some of the bonds on the open market for their fair value plus accrued interest and retired them. Magnus uses the effective interest method for amortization of bond premiums and discounts. Other information pertaining to the issuance of the bonds follows: Par-value of the bonds sold $ 12,000,000 Stated rate of interest for the bonds issued Effective rate of interest for the bonds issued Percentage of bonds retired on May 1, 2023 25% Price at which bonds were repurchased on May 1, 2023 Assume that Magnus has a December 31 year end, and that the company pays any interest accrued at the time the debt is retired. 9% 896 101 Required: 1. 2. Prepare an amortization schedule for the first 3 years of the bond issue. (5 marks) Prepare the journal entry for the issuance of the bond on January 1, 2021. (1 mark) Prepare all journal entries after the issuance of the bond until December 31, 2021. (3 marks) 4. Calculate the gain or loss on the partial retirement of the bonds on May 1, 2023. (3 marks) Prepare the journal entries to record the partial retirement of the bonds on May 1, 2023. (5 marks) 5