Problem 14-2

Ivanhoe Co. is building a new hockey arena at a cost of $2,620,000. It received a down payment of $450,000 from local businesses to support the project, and now needs to borrow $2,170,000 to complete the project. It therefore decides to issue $2,170,000 of 10%, 10-year bonds. These bonds were issued on January 1, 2016, and pay interest annually on each January 1. The bonds yield 9%.

A - Prepare the journal entry to record the issuance of the bonds on January 1, 2016.

B - Prepare a bond amortization schedule up to and including January 1, 2020, using the effective interest method.

Date

Cash Paid

Interest Expense

Premium Amortization

Carrying Amount of Bonds

C - Assume that on July 1, 2019, Ivanhoe Co. redeems half of the bonds at a cost of $1,146,600 plus accrued interest. Prepare the journal entry to record this redemption

* Journal Entry To record interest

* Journal Entry To record reacquisition