Question
I. On May 1, 2021, Kenny Corp. issued $13 million of its 8% bonds. The bonds mature in 5 years. The bonds were priced to
I. On May 1, 2021, Kenny Corp. issued $13 million of its 8% bonds. The bonds mature in 5 years. The bonds were priced to yield 10%. Interest is payable semiannually on October 31 and April 30. Kenny records interest at the effective rate.
Required:
1. Determine the price of the bonds at May 1, 2021
2. Prepare the journal entry to record the bond issuance on May 1, 2021.
3. Prepare an amortization table through the maturity (for 5 years).
4. Prepare the entry to record interest on October 31, 2021 for the first payment.
5. Prepare the adjusting entry on December 31, 2021.
6. Prepare the entry to record interest on April 30, 2022 for the second payment.
7. Assume all bonds are retired at 102.5 on April 30, 2022 right after the second payment is made. Prepare the necessary journal entry on April 30, 2022.
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