Question 3

Dixon Ltd. issued $3,000,000 of 6%, 10 year bonds on September 30, 2022 when the effective interest rate was 8%. The bonds pay interest semi-annually on June 30 and December 31. The firm uses the effective interest method of amortizing discounts and premiums.

On September 30, 2023, 70% of the bonds were called in at 98 and retired.

Use the space below for an amortization table if you wish to use it to assist in answering the question. There are no marks for the table.

(a) Prepare journal entries for the following:

September 1, 2022 Issuance of bonds

December 31, 2022 Payment of interest

June 30, 2023 Payment of interest

September 30, 2023 Retirement of 70% of the bonds