Question - Venezuela Co. is building a new hockey arena at a cost of $2,509,000. It received a downpayment of $511,700 from local businesses to support the project, and now needs to borrow $1,997,300 to complete the project. It therefore decides to issue $1,997,300 of 10%, 10 year bonds. These bonds were issued on January 1, 2013, and pay interest annually on each January 1. The bonds yield 9%. Venezuela paid $62,800 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.
(b) Assume that on July 1, 2016, Venezuela Co. redeems half of the bonds at a cost of $1,078,870 plus accrued interest. Prepare the journal entry to record this redemption.