On April 1, 2019, Illustrious Inc. sold $8,000,000 of four-year, 4% bonds for $8,298,101. From the proceeds, Illustrious paid its investment bank a $150,000 sales commission. Interest is payable semi-annually on September 30 and March 31. On October 1, 2021, Illustrious buys back $3,000,000 of bonds on the open market for their face value.

Required:
a. What are the nominal and effective rates of interest that Illustrious is paying on the bonds expressed as an annual percentage rate?
b. Assuming that Illustrious records the bond liability at amortized cost, what is the net book value of the bonds outstanding on October 1, 2019? April 1, 2020? Use your financial calculator to determine these amounts and then verify them by constructing a schedule of interest expense and bond amortization during the life of the bond. For this part, ignore the redemption of bonds on October 1, 2021.
c. Assuming that Illustrious records the bond liability at amortized cost, prepare the journal entry to record the issuance of the bonds.
d. Assuming that Illustrious records the bond liability at amortized cost, prepare the journal entry to record the redemption of the bond on October 1, 2021.
e. Assuming that Illustrious designates the liability as at fair value through profit or loss, prepare the journal entry to record the issuance of the bonds.