Jambalaya Inc. issued $300,000 bonds on January 1st, 2013 due in twelve years. The stated rate on the bond was 10% while the effective rate was 12%. The bond has semiannual interest payments on June 30th and December 31st. The bonds mature on December 31st, 2024. The company has a December 31st year end. The company follows IFRS.
a. Calculate the issue price of the bond assuming the entire bond is sold on January 1st, 2013.
b. Complete the following bond amortization schedule for the interest periods indicated:
Date: Interest Paid: Interest Expense: Amortization: Unamortized premium or discount: Bond carrying value:
January 1st, 2013
June 30th, 2013
December 31st, 2013
June 30th, 2014
c. Prepare the journal entries at:
- The issue date of January 1st, 2013
- The first interest payment June 30th, 2013
- The second interest payment December 31st, 2013
d. Prepare the journal entry at March 1st, 2014 assuming that this date, the company retires 40% of the bonds. The bonds are retired at 105 plus accrued interest.