Venezuela Co. is building a new hockey arena at a cost of $9,000,000. It received a downpayment
Question:
Venezuela Co. is building a new hockey arena at a cost of $9,000,000. It received a downpayment of $2,000,000 from local businesses to support the project, and now needs to borrow $7,000,000 to complete the project. It therefore decides to issue $7,000,000 of 12% 10 '-year bonds. These bonds were issued on January 1, 2021, and pay interest annually on each January 1. The bonds yield 8.00%
Instructions:
(a) Prepare the journal entry to record the issuance of the bonds and the related bond issue costs incurred on January 1, 2021.
(b) Prepare a bond amortization schedule up to and including January 1, 2024, using the effective interest method.
(c) Assume that on Jan 2, 2024, Venzuela Co. retires half of the bonds at a cost of $5,000,000 plus accrued interest. Prepare the journal entry to record this retirement.
Effective Training Systems Strategies and Practices
ISBN: 978-0132729048
5th edition
Authors: Nick P Blanchard, James Thacker