Question
1. StarCenter Co. is building a new music arena at a cost of $5,600,000. It received a down payment of $600,000 from local businesses to
1. StarCenter Co. is building a new music arena at a cost of $5,600,000. It received a down payment of $600,000 from local businesses to support the project, and now needs to borrow $5,000,000 to complete the project. It therefore decides to issue $5,000,000 of 8%, 15-year bonds. These bonds were issued on January 1, 2016, and pay interest semi-annually on each January 1 and July 1. The bonds yield 6%. 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, 2018, using the effective-interest method.
(c)Assume that on January 1, 2018, StarCenter Co. retires 20% of the bonds at a cost of $1,045,000 after the interest payment had been recorded. Prepare the journal entry to record this retirement.
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