Related bond issue costs incurred


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 decided 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 amortixation schedule up to and including Jaanuary 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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Accounting Basics: Related bond issue costs incurred
Reference No:- TGS083650

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