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56 QUESTION A- Accounting for Bonds (16 marks; 28 minutes) Donald Ltd. issued 4-year, $40 million bonds on January 1, 2021. The stated interest rate is 5.5 percent, and interest is payable semi- annually on June 30 and December 31. The market interest rate for similar bonds was 6 percent at the time of issuance. The company uses a discount or premium on bonds payable account and the effective interest method to amortize bond discount or premium. Use the tables provided with this exam for your present value calculations. Required (Round the results of your calculations to the nearest dollar): 1. Prepare the journal entry to record the issuance of the bonds on January 1, 2021. (3 marks) 2. Prepare the journal entry to record the interest payment on December 31, 2021. (4 marks) 3. Assume that on January 1, 2022, Donald repurchases one-half of the outstanding bonds on the open market at 93. Prepare the journal entry to record this transaction. Ignore the interest that would accrue for one day on January 1, 2022. (4 marks) 4. Show, in good form, how the bond-related information would be reported on a statement of financial position prepared immediately after this transaction, and on a statement of cash flows for the year 2022 based on the indirect method. (5 marks) 56 QUESTION A- Accounting for Bonds (16 marks; 28 minutes) Donald Ltd. issued 4-year, $40 million bonds on January 1, 2021. The stated interest rate is 5.5 percent, and interest is payable semi- annually on June 30 and December 31. The market interest rate for similar bonds was 6 percent at the time of issuance. The company uses a discount or premium on bonds payable account and the effective interest method to amortize bond discount or premium. Use the tables provided with this exam for your present value calculations. Required (Round the results of your calculations to the nearest dollar): 1. Prepare the journal entry to record the issuance of the bonds on January 1, 2021. (3 marks) 2. Prepare the journal entry to record the interest payment on December 31, 2021. (4 marks) 3. Assume that on January 1, 2022, Donald repurchases one-half of the outstanding bonds on the open market at 93. Prepare the journal entry to record this transaction. Ignore the interest that would accrue for one day on January 1, 2022. (4 marks) 4. Show, in good form, how the bond-related information would be reported on a statement of financial position prepared immediately after this transaction, and on a statement of cash flows for the year 2022 based on the indirect method