Gibberish Inc. issued bonds on July 1, 20X0. Information on the bonds has been provided:

Bond expiry date	June 30, 20X8
Number of bonds issued	300 bonds
Face value of each bond	$1,000
Interest dates	December 31 and June 30
Stated interest rate	6%
First interest payment	December 31, 20X0
Effective interest rate	8%

Gibberishs fiscal year end is September 30.

Required:

(a) Prepare Gibberishs journal entries for the first year of the bonds (i.e. from bond issuance through and including June 30, 20X1). (12 marks)

(b) On February 28, 20X6, Gibberish repurchases 150 bonds (i.e. half of the bond issuance) when the book value of bonds is $286,646 (i.e. repurchased bonds are worth $143,323). Gibberish pays $150,000 including accrued interest. Journalize the bond repurchase. (4 marks)

(c) The remaining bonds are held by Guff Inc. On June 30, 20X8, Gibberish doesnt have the cash to repay the $150,000 face value of bonds. Instead, Gibberish and Guff negotiate new terms: Gibberish will pay $120,000 in three years and interest at 4% semi-annually. The new effective interest rate is 6%.

Determine whether this is a modification or settlement. (4 marks)