On 1 July 2016, Walton Limited issued six-year bonds with a face value of $1 million and a contract rate of interest of 8% per annum. The amount received from the issue was $962,504, ensuring an effective rate of interest of 10% per annum. Interest is payable semi-annually on 31 December and 30 June.

On 1 August 2016, Walton Limited used the funds from the bonds issued above to make a down-payment on a $2,100,000 warehouse property, and issuing an additional 8% 'notes payable' for the difference. Both the interest and principal are due in 2019.

Walton Limited began using the warehouse immediately after payment. The warehouse will be depreciated using the straight-line method over 50 years with no residual value.

Walton Limited adjusts and closes its books annually on 30 September. Ignore GST.

Required:

1. Prepare the journal entries for (i) the bond issue and (ii) the purchase of the warehouse.
2. Calculate the total interest expense that would be recognised over the life of the bonds, assuming they are held until maturity.
3. Do all required adjusting journal entries on 30 September 2016 (hint: adjusting journal entries are for the 'bonds', 'warehouse', and 'notes payable' related accounts).
4. On 1 July 2017, after interest was paid, the bonds were redeemed in the open market for $880,000, paid in cash. Since this bond was redeemed before maturity, discuss how the redemption should be treated and recorded in the accounts as at the redemption date (