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Overtime Ltd. issued $6 million of 11% bonds on June 1, 2020. The bonds pay interest on December 1 and June 1. The bonds' due
Overtime Ltd. issued $6 million of 11% bonds on June 1, 2020. The bonds pay interest on December 1 and June 1. The bonds' due date is June 1, 2024. The bonds yield 10%.
Overtime closes its books on December 31.
Required:
- Calculate the issue proceeds of the bonds and prepare the journal entry to record the issuance of the bonds on June 1, 2020 (5 marks).
- Prepare a bond amortization schedule using the effective interest method (4 marks).
- Prepare the adjusting entry required (if any) for the year ended December 31, 2021 (3 marks).
- Prepare the journal entry to record interest on June 1, 2022 (3 marks).
- Assume that on June 1, 2022, the company retires half of the bonds for $3,000,000. Prepare the journal entry to record interest this retirement (3 marks).
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