Culture Co. builds a new museum & arena. Culture borrows $15,000,000 by issuing 10-year, 4% bonds, priced to yield 5%, to finance the construction. The bonds were issued on January 1, 2018, and pay interest annually on each December 31.

Instructions

1. Prepare the journal entry to record the issuance of the bonds on January 1, 2018, assuming the effective interest method is used to record interest.

2. Determine the amount of interest expense (not cash payment) recorded on the bonds each year at 12/31, and the present value of the bonds after the payment at each of the dates shown below, using the effective interest method.

Date	Interest Expense	Present value (Book Value)
12/31/2018
12/31/2019

c) Please record the entry made for interest expense at 12/31/2018.

d) Assume that on June 30, 2021 (after 3 years), Culture retires 50% of the bonds at a price of 101 plus accrued interest.

i) Prepare the journal entry to record this retirement.

Note: You must adjust the PV of the bonds to June 30, 2021 (accrue interest, etc.).

3e) Please provide an entry for the payment of the accrued cash interest due at the retirement date. You need not include the interest expense amount.