Problem
Shamrock Co. is building a new hockey arena at a cost of $2,600,000. It received a downpayment of $460,000 from local businesses to support the project, and now needs to borrow $2,140,000 to complete the project. It therefore decides to issue $2,140,000 of 12%, 10-year bonds. These bonds were issued on January 1, 2016, and pay interest annually on each January 1. The bonds yield 11%.
1. Prepare a bond amortization schedule up to and including January 1, 2020, using the effective interest method.
2. Assume that on July 1, 2019, Shamrock Co. redeems half of the bonds at a cost of $1,143,800 plus accrued interest. Prepare the journal entry to record this redemption.