Prepare the journal entries required at july

Reference no: EM132475808

Point 1: Banff Corporation issued $500,000 of 8% callable (payable each June 30 and December 31), 5-year bonds on July 1, 2019 for net cash proceeds of $542,600 (ie: after considering the bond issue costs of $3,000 paid on issuance).

Point 2: Their fiscal year end is December 31. On January 1, 2020, the corporation exercised its call privilege and retired the bonds for $535,000.

Point 3: Banff uses the effective interest method for amortization of any discount or premium and measures debt using the amortized cost basis.

Required:

Question a) Prepare the journal entries required at (a) July 1, 2019; b) December 31, 2019 and c) January 1, 2020.

Question b) How would your response change if Banff measured the debt using the fair value basis? Assume that the fair value on December 31, 2019/January 1, 2020 was $533,000. Provide journal entries for July 1, 2019, December 31, 2019, and January 1, 2020.

Reference no: EM132475808

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