Question
Venezuela Co. is building a new hockey arena at a cost of $2,500,000. It received a down payment of $500,000 from local businesses to support
Venezuela Co. is building a new hockey arena at a cost of $2,500,000. It received a down payment of $500,000 from local businesses to support the project, and now needs to borrow $2,000,000 to complete the project. It therefore decides to issue $2,000,000 of 10.5%, 10-year bonds. These bonds were issued on January 1, 2009, and pay interest annually on each January 1. The bonds yield 10%.
REQUIRED:
a) Calculate the issue price of the bonds.
b) Prepare the journal entry for the issuance of the bonds.
c) Prepare a bond amortization schedule up to and including January 1, 2013, using the effective-interest method.
d) Assume that on July 1, 2012, Venezuela Co. retires half of the bonds at a cost of $1,065,000 plus accrued interest. Prepare the journal entry to record this retirement.
Thanks!
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