(Issuance and Redemption of Bonds) Venezuela Co. is building a new hockey arena at a cost of $2,500,000. It received a downpayment 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 onJanuary 1, 2016, 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, 2016.(b) Prepare a bond amortization schedule up to and including January 1, 2020, using the effective-interest method.(c) Assume that on July 1, 2019, Venezuela Co. redeems half of the bonds at a cost of $1,065,000 plus accrued interest.Prepare the journal entry to record this redemption.
(Issuance and Redemption of Bonds) Venezuela Co. is building a new hockey arena at a cost of $2,500,000. It received a downpayment 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, 2016, and pay interest annually on each January 1. The bonds yield 10%.
Instructions
(a) Prepare the
(b) Prepare a bond amortization schedule up to and including January 1, 2020, using the effective-interest method.
(c) Assume that on July 1, 2019, Venezuela Co. redeems half of the bonds at a cost of $1,065,000 plus accrued interest.
Prepare the journal entry to record this redemption.
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