On January 1, 2018, Naomi, Inc. issued $1,000,000, 4% bonds when the market rate was 6%. Interest is payable semiannually on June 30 and December 31 with the bonds maturing on December 31, 2027 (10 years). The bonds are callable at 102. On January 1, 2023, Naomi retired $500,000 of the bonds at the call price. At the time they retired the bonds, they also paid the accrued interest for those bonds retired. Required: Prepare the journal entry to record the issuance of the bonds. Naomi uses the effective interest method to amortize any discount or premium. Prepare an amortization schedule for the bonds Prepare any required journal entries for interest payments for the first year – 2018. Prepare all required entries to record the retirement of the bonds on January 1, 2023.
On January 1, 2018, Naomi, Inc. issued $1,000,000, 4% bonds when the market rate was 6%. Interest is payable semiannually on June 30 and December 31 with the bonds maturing on December 31, 2027 (10 years). The bonds are callable at 102. On January 1, 2023, Naomi retired $500,000 of the bonds at the call price. At the time they retired the bonds, they also paid the accrued interest for those bonds retired.
Required:
- Prepare the
journal entry to record the issuance of the bonds. - Naomi uses the effective interest method to amortize any discount or premium. Prepare an amortization schedule for the bonds
- Prepare any required journal entries for interest payments for the first year – 2018.
- Prepare all required entries to record the retirement of the bonds on January 1, 2023.
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A bond is a fixed-income product that symbolizes the loan that an investor makes to a borrower, typically a corporation or a government. The terms of the loan and its payments are outlined in this agreement between the lender and the borrower. Companies, municipalities, states, and sovereign governments use these bonds to finance operations and initiatives. The units of corporate debt that are issued by the corporations and securitized as tradable assets are, in other words, what is meant by this definition.
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