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(Issuance and Retirement of Bonds) StarCenter Co. is building a new music arena at a cost of $5,600,000. It received a down payment of $600,000

(Issuance and Retirement of Bonds) StarCenter Co. is building a new music arena at a cost of $5,600,000. It received a down payment of $600,000 from local businesses to support the project, and now needs to borrow $5,000,000 to complete the project. It therefore decides to issue $5,000,000 of 8%, 20-year bonds. These bonds were issued on January 1, 2013, and pay interest annually on each January 1. The bonds yield 10%. StarCenter paid $60,000 in bond issue costs related to the bond sale.

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(a) Prepare the journal entry to record the issuance of the bonds and the related bond issue costs incurred on January 1, 2013.

(b) Prepare a bond amortization schedule up to and including January 1, 2017, using the effective- interest method.

(c) Assume that on July 1, 2016, StarCenter Co. retires 40% of the bonds at a cost of $2,040,000 plus accrued interest. Prepare the journal entry to record this retirement.

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