Accounting for bond issuance and gain on retirementAccounting for bond issuance and gain on retirement

Twilight Corp. wanted to raise cash to fund its expansion by issuing long$-$term bonds. The corporation

hired an investment banker to manage the issue $($best efforts underwriting$)$ and also hired the services

of a lawyer and an audit firm. On June $1,2023,$ Twilight sold $$500,000$ in long$-$term bonds. The bonds

will mature in $10$ years and have a stated interest rate of $10\%.$ Other bonds that Twilight has issued

with identical terms are traded based on a market rate of $8\%.$ The bonds pay interest semi$-$annually

on May $31$ and November $30.$ The bonds are to be accounted for using the effective interest method.

On June $1,2025,$ Twilight decided to retire $20\%$ of the bonds. At that time the bonds were selling at

Instructions $($Round all values to the nearest dollar$)$

a$)$ Prepare the journal entry for the issuance of the bonds on June $1,2023.$

b$)$ What was the interest expense related to these bonds that would be reported on Twilight's

calendar $2023$ income statement?

c$)$ Prepare all entries from after the issue of the bond until December $31,2023.$

d$)$ Calculate the gain or loss on the partial retirement of the bonds on June $1,2025.$

e$)$ Prepare the journal entry to record the partial retirement on June $1,2025.$

Twilight Corp. wanted to raise cash to fund its expansion by issuing long$-$term bonds. The corporation

hired an investment banker to manage the issue $($best efforts underwriting$)$ and also hired the services

of a lawyer and an audit firm. On June $1,2023,$ Twilight sold $$500,000$ in long$-$term bonds. The bonds

will mature in $10$ years and have a stated interest rate of $10\%.$ Other bonds that Twilight has issued

with identical terms are traded based on a market rate of $8\%.$ The bonds pay interest semi$-$annually

on May $31$ and November $30.$ The bonds are to be accounted for using the effective interest method.

On June $1,2025,$ Twilight decided to retire $20\%$ of the bonds. At that time the bonds were selling at

$102.$

Instructions $($Round all values to the nearest dollar$)$

a$)$ Prepare the journal entry for the issuance of the bonds on June $1,2023.$

b$)$ What was the interest expense related to these bonds that would be reported on Twilight$$s

calendar $2023$ income statement?

c$)$ Prepare all entries from after the issue of the bond until December $31,2023.$

d$)$ Calculate the gain or loss on the partial retirement of the bonds on June $1,2025.$

e$)$ Prepare the journal entry to record the partial retirement on June $1,2025$