Question
On January 1, 2020, ACME Incorporated issued 6% par value $1,000,000 bonds due in 10 years. The bonds were issued at 97. Interest payments are
On January 1, 2020, ACME Incorporated issued 6% par value $1,000,000 bonds due in 10 years. The bonds were issued at 97. Interest payments are on June 30th and December 31st. The bonds are callable any time after December 31, 2022 at 103.
On June 30, 2023, after the interest was paid, the entire bond issue was called and replaced with a new bond with a par value $1,000,000 issued at 4% due in 10 years. The bonds were issued at 102. Interest payments are on June 30th and December 31.
ACME follows IFRS and uses the effective interest method to amortize discounts and premiums on bonds. When calculating the effective interest, round to 3 decimal places, and journal entry amounts should be rounded to the nearest dollar.
Required
- Prepare the journal entry to record the retirement of the bonds on June 30, 2023
- Prepare the journal entry to record the issuance of the new bond
- Prepare the journal entry for the first interest payment of the new bond on December 31, 2023
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started