Venezuela Co. is building a ne w hockey arena at a cost of $…
Venezuela Co. is building a ne
w hockey arena at a cost of $2,50
0,000. It received a down
payment of $500,000 from local busin
esses to support the projec
t, and now needs to
borrow $2,000,000 to complete the proj
ect. It therefore decides
to issue
$2,000,000 of 8%, 10 year bonds. These bonds were issued on Jan
uary 1, 2014, and pay
interest annually on each Ja
nuary 1, starting January 1, 2015.
The bonds yield 10%.
Venezuela paid $48,000 in bond issue
costs related to the bond
sale.
Instructions
a)
Prepare the journal entry t
o record the issuance of the bonds a
nd the related bond
issue costs incurred on January 1, 2014.
b)
Prepare a bond amortization sch
edule up to and including Januar
y 1, 2018, using the
effective interest method.
c)
Assume that on July 1, 2017, Venezuel
a Co. redeems half of the
bonds at a cost of
$980,000 plus accrued interest. Prepare the journal entry to re
cord this redemption.
