Venzuela Co. is building a new hockey arena at a cost of $2,500,000. It received a down payment of $500,000 from local businesses to support the project and now needs to borrow $2,000,000 to complete the project. It therefore decides to issue $2,000,000 of 10.5%, 10-year bonds. These bonds were issued on January 1, 2018, and pay interest annually on each January 1. The bonds yield 10%.
Instructions
a. Prepare the journal entry to record the issuance of the bonds on January 1, 2018.
b. Prepare a bond amortization schedule up to and including January 1, 2022.
c. Assume that on July 1, 2021, Venzuela Co. retires half of the bonds at a cost of $1,065,000 plus accrued interest. Prepare the journal entry to record this retirement.