Reference no: EM13156400
Venzuela Co. is building a new hockey arena at a cost of $2,500,000. It received a downpayment of $500,000 from local businesses to support the project, and now needs to borrow $2,000,000 to complete the project. It therefore decides to issue $2,000,000 of 10.5%, 10-year bonds. These bonds were issued on January 1, 2009, and pay interest annually on each January 1. The bonds yield 10%. Venzuela paid $50,000 in bond issue costs related to the bond sale.
Instructions:
(a) Prepare the journal entry to record the issuance of the bonds and the related bond issue costs incurred on January 1, 2009.
(b) Prepare a bond amortization schedule up to and including January 1, 2013, using the effective-interest method.
(c) Assume that on July 1, 2012, Venzuela Co. retires half of the bonds at a cost of $1,065,000 plus accrued interest. Prepare the journal entry to record this retirement.
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