Camco Inc. sold a $400,000, 12% bond on July 1, 2020. The bonds were dated April 1, 2020 and pay interest semi-annually each April 1st and October 1st and are due to mature on April 1, 2023 (3-year bonds). The first interest payment will be made on October 1, 2020. Camco Inc. has a year-end of December 31. The market rate of interest on July 1, 2020 was 16%.

REQUIRED:

(a) Calculate the selling price of the bond. Please note that the bonds were sold between interest payment dates!

(b) Prepare all journal entries to record the transactions AND year-end adjusting entries from July 1, 2020 up to and including April 1, 2021, under the assumption that the bonds referred to in part (a) sold for $365,538 (this amount does not include the accrued interest) on July 1, 2020 and would have sold for 368,058 on October 1, 2020. The Company uses the effective-interest method to calculate interest expense and the amortization of any premium/discount on the sale of the bond.

(c) Assume that on June 1, 2021, Camco Inc. repurchased one-tenth (10%) of the bond issue on the open market at 98% plus accrued interest. Prepare the journal entries to record the repurchase (or journal entry, if you choose to combine the two).