Kieso, Intermediate Accounting, 15e

14-2

Venezuela Co. is building a new hockey arena at a cost of $2,677,000. It received a downpayment of $519,200 from local businesses to support the project, and now needs to borrow $2,157,800 to complete the project. It therefore decides to issue $2,157,800 of 12%, 10 year bonds. These bonds were issued on January 1, 2013, and pay interest annually on each January 1. The bonds yield 11%. Venezuela paid $58,400 in bond issue costs related to the bond sale.

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

Date	Acct Titles	Debit	Credit
Jan 1, 2013
(blank cell)
(blank cell)
(blank cell)

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

Date	Cash Paid	Interest Expense	Premium Amortization	Carrying Amt of Bonds
1/1/13
1/1/14
1/1/15
1/1/16
1/1/17

(c) Assume that on July 1, 2016, Venezuela Co. redeems half of the bonds at a cost of $1,151,110 plus accrued interest. Prepare the journal entry to record this redemption.

Date	Acct. Titles	Debit	Credit
July 1, 2016
(blank cell)
(blank cell)
(blank cell)	(To record interest.
July 1, 2016
(blank cell)
(blank cell)
(blank cell)
(blank cell)
(blank cell)	(To record reaquisition)