Prepare the entry required on Dec

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Question - On June 30, 2013, Indigo Limited issued 12% bonds with a par value of $794,000 due in 20 years. They were issued at 98 and were callable at 104 at any date after June 30, 2020.

Because of lower interest rates and a significant change in the company's credit rating, it was decided to call the entire issue on June 30, 2020, and to issue new bonds. New 10% bonds were sold in the amount of $993,000 at 102; they mature in 20 years. The company follows IFRS and uses the effective interest method. The interest payment dates are December 31 and June 30 of each year.

a1. Prepare an effective interest table for the bonds for the inception of the bond to the date of the redemption.

a2. Prepare journal entries to record the old issue ant the sale of the new issue on June 30, 2020.

b. Prepare the entry required on Dec 31, 2020 to record the payment of the first six months of interest and the amortization of the bond premium.

Reference no: EM132819801

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