On January 1, 2014 Victory Falls Company issued $2,100,000 in bonds that mature in 5 years. The bonds have a stated interest rate of 8% and pay interest quarterly each year. When the bonds were sold, the market rate of interest was 6%. These bonds, when issued and sold, contained a call feature, which allowed the company to retire the bonds early, if they elected, for a one-time payment equal to 1% of the book value at the time of retirement. Required: 1- Provide the adjusting journal entries to record interest expense on June 30, 2014, and December 31, 2014 using the straight-line method and using the effective-interest method. 2- What is the book value of the bonds on June 30, 2014 and December 31, 2014 using straight-line method and using effective-interest method?
On January 1, 2014 Victory Falls Company issued $2,100,000 in bonds that mature in 5 years. The bonds have a stated interest rate of 8% and pay interest quarterly each year. When the bonds were sold, the market rate of interest was 6%. These bonds, when issued and sold, contained a call feature, which allowed the company to retire the bonds early, if they elected, for a one-time payment equal to 1% of the book value at the time of retirement.
Required:
1- Provide the
2- What is the book
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