Van Gogh Corporation issues a 2 year, 6%, $200 million bond on 01/1/2000. The market rate is 10%. Interest is paid semi-annually on 06/30 and 12/31 of each year.

a) If Van Gogh uses the effective interest method to determine its interest expense, prepare the journal entries it will make in the year 2000.

b) On 01/1/2001 Van Gogh redeems the bond for $183.96. Record the redemption. What is the market rate of interest implicit in the redemption price?