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Donald Ltd. issued a 4-year, $40 million bonds on January 1, 2021. The stated interest rate is 5.5 percent, and interest is payable semi-annually on
Donald Ltd. issued a 4-year, $40 million bonds on January 1, 2021. The stated interest rate is 5.5 percent, and interest is payable semi-annually on June 30 and December 31. The market interest rate for similar bonds was 6 percent at the time of issuance. The company uses a discount or premium on bonds payable and the effective interest method to amortize bond discount or premium. Use the taxes provided for present value calculations.
- Prepare the journal entry to record the issuance of bonds on January 1, 2021
- Prepare the journal entry to record the interest payment on December 31, 2021
- Assume that on January 1, 2022, Donald repurchases one-half of the outstanding bonds on the open market at 9 Prepare the journal entry to record this transaction. Ignore the interest that would accrue for one day on January 1, 2022
- Show, in good form, how the bond-related information would be repeated on a statement of financial position prepare immediately after this transaction, and on a statement of cash flows for the year 2022 based on the indirect method
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