Reference no: EM132600875
Question - On January 1, 2018, the company had issued $1,200,000 par value, 7%, five-year bonds at a price of $1,251,176. Interest was payable semiannually on June 30 and December 31. The market rate of interest was 6% on the date the bond were issued.
On March 1, 2019, the company extinguished 40% of the bonds outstanding by issuing 15,000 of its common shares. It also paid in cash all interest due up to March 1, 2019 on these bonds. The market value of these shares was $36 per share. Assume the company is using IFRS to account for the bonds.
REQUIRED -
a] Make the journal entry to record the interest expense on the bonds payable, on December 31, 2018.
b] Make the journal entry to record the payment of interest accrued on the bonds which were retired on March 1, 2019.
c] Make the journal entry to record the early retirement of the bonds on March 1, 2019.
Make an amortization table for the bond issue for the appropriate period would be useful in solving this problem.
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