Question
Venezuela Co. is building a new hockey arena at a cost of $8,000,000 . It received a downpayment of $3,000,000 from local businesses to support
Venezuela Co. is building a new hockey arena at a
cost of $8,000,000 . It received a downpayment of $3,000,000 from local
businesses to support the project, and now needs to borrow $5,000,000 to complete the project. It therefore decides to issue $5,000,000 of 10.00% ,10 -year bonds. These bonds were issued on January 1, 2018, and pay interest annually on each January 1. The bonds yield 8.00% .
.
Instructions:
"(a) Prepare the journal entry to record the issuance of the bonds and the related bond issue costs incurred on January 1, 2018."
(b) Prepare a bond amortization schedule up to and including January 1, 2021, using the effective interest method.
(c) Assume that on Jan 2, 2021, Venzuela Co. retires half of the bonds at a cost of $3,215,000 plus accrued interest. Prepare the journal entry to record this retirement.
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