Problem 14-2
Venezuela Co. is building a new hockey arena at a cost of $2,517,000. It received a downpayment of $510,900 from local businesses to support the project, and now needs to borrow $2,006,100 to complete the project. It therefore decides to issue $2,006,100 of 11%, 10 year bonds. These bonds were issued on January 1, 2013, and pay interest annually on each January 1. The bonds yield 10%. Venezuela paid $67,000 in bond issue costs related to the bond sale.
(a) Prepare the journal entry to record the issuance of the bonds and the related bond issue costs incurred on January 1, 2013. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
(b) Prepare a bond amortization schedule up to and including January 1, 2017, using the effective interest method. (Round answers to 0 decimal places, e.g. 38,548.)
(c) Assume that on July 1, 2016, Venezuela Co. redeems half of the bonds at a cost of $1,082,310 plus accrued interest. Prepare the journal entry to record this redemption. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)