On January 1, 2017, Pacific Limited issued $80,000,000 of 9% callable bonds with the bond price...

 

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On January 1, 2017, Pacific Limited issued $80,000,000 of 9% callable bonds with the bond price $77,414,756. The bonds matured on 31 December 2020. The effective interest rate on the bonds was 10%. The bonds paid interest on June 30 and December 31. On 31 December 2017, Pacific notified the bondholders of its intent to call the bonds at a redemption price of $80,100,000 (i.e. immediately after the 2nd interest payment.) Required: Using the effective interest rate method: 1) Prepare the discount amortization table on: (i) the bonds issuance date (ii) the first two interest payments to bondholders by following the format below (round to nearest dollar). Interest Payment Date Interest Paid Bond Interest Discount Unamortized Carrying Expense Amortization Discount Amount 2) Prepare journal entries for the following transactions: (i) Issuance of the bonds by Pacific (ii) The second interest payment 3) Prepare journal entry for the redemption of the bonds 4) Explain briefly why the redemption price is usually higher than the face amount of the bonds. On January 1, 2017, Pacific Limited issued $80,000,000 of 9% callable bonds with the bond price $77,414,756. The bonds matured on 31 December 2020. The effective interest rate on the bonds was 10%. The bonds paid interest on June 30 and December 31. On 31 December 2017, Pacific notified the bondholders of its intent to call the bonds at a redemption price of $80,100,000 (i.e. immediately after the 2nd interest payment.) Required: Using the effective interest rate method: 1) Prepare the discount amortization table on: (i) the bonds issuance date (ii) the first two interest payments to bondholders by following the format below (round to nearest dollar). Interest Payment Date Interest Paid Bond Interest Discount Unamortized Carrying Expense Amortization Discount Amount 2) Prepare journal entries for the following transactions: (i) Issuance of the bonds by Pacific (ii) The second interest payment 3) Prepare journal entry for the redemption of the bonds 4) Explain briefly why the redemption price is usually higher than the face amount of the bonds.

Answer rating: 100% (QA)

1 2 i ii 3 Interest Payment Data Jan 1 2017 June 30 2017 Dec 31 2017 Date Jan 1 2017 Date Dec 31 201... View the full answer