On January 1, 2008, Tango-In-The-Night, Inc. issued $75 million of bonds with a 9% coupon interest rate. The bonds mature in 10 years and pay interest semiannually on June 30 and December 31 of each year. The market rate of interest on January 1, 2008 for bonds of this type was 11%. The company closes its books on December 31.
Required:
1. At what price were the bonds issued?
2. What is the book value of the bonds on January 1, 2010?
3. On January 1, 2010, the market interest rate for bonds of this type is 10%. What is the market value of the bonds on this date?
4. Suppose that the bonds were repurchased for cash on January 1, 2010 at the market price. If you ignore taxes, what journal entry would the company make to record the debt retirement?