Prepare the journal entry to record the payment of interest

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On January 1st, 2005 Borrower Limited sold a 10% semi-annual (June 30th, December 31st), four year, $100 million bond when bonds of equivalent risk and maturity were yielding 8% annually. On January 1st, 2007, when annual market yields for bonds with a two year remaining life were 12%, Borrower retired the entire bond at market value. To finance this retirement Borrower issued a new bond with an annual yield rate of 12%, payable semi-annually. Borrower is a company whose shares are actively traded on the Toronto Stock Exchange. ->Ignore semi-annual. Only annual will be tested.

Problem a. Prepare the journal entry to record the issuance of the bond on January 1st, 2005.

Problem b. Prepare the journal entry to record the payment of interest on June 30th, 2005 and December 31st, 2005.

Reference no: EM132809158

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