Question
Valor Ltd. issued $2,000,000 of 6%, 10 year bonds on September 30, 2020 when the effective interest rate was 8%. The bonds pay interest semi-annually
Valor Ltd. issued $2,000,000 of 6%, 10 year bonds on September 30, 2020 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.
Immediately after the interest payment, on June 30, 2021, 70% of the bonds were called in at 98 and retired. Round to the nearest dollar.
Use the space below for an amortization table if you wish to use it to assist in answering the question.
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(a) Prepare journal entries for the following:
September 1, 2020 Issuance of bonds
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December 31, 2020 Payment of interest
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June 30, 2021 Payment of interest
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June 30 2021 Retirement of 70% of the bonds
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Calculate interest expense for December 31, 2021. Journal entry is not required.
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Financial Accounting An International Introduction
Authors: David Alexander
7th Edition
129229583X, 978-1292295831
