Problem - Venezeula Co. is building a new hockey arena at a cost of 2,500,000. It recieved a downpayment of 500,000 from local businesses to support the project and needs to borrow 2,000 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%. Venezuela paid 50,000 in bond issue costs related to the bond sales.
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 Venezuela co. retires half of the bonds at a cost of $1,065,000 plus accrued interest. Prepare journal entry to record this retirement.