Exercise #1: The company Alfa issued bonds with a par value of $50 million and a nominal interest rate of 6.5%. The bonds pay interest every six months on January 1 and July 1. It aired on July 1, 2019 and on that date it had a duration of 12 years. On the issuance date, the market interest rate (yield) was 7.75%.

Assume the same data from exercise 1, except that the bonds DO NOT pay periodic interest.

a. Prepare the journal entry to record the issuance of the bonds on July 1, 2019.

b. Prepare the daily wage entry corresponding to July 1, 2021.

C. If, with five years to go before the bonds mature, the company withdraws them in the amount of $37 million, calculate the gain or loss on the withdrawal of the bonds.