Problem
Swifty Co. is building a new hockey arena at a cost of $2,680,000. It received a downpayment of $500,000 from local businesses to support the project, and now needs to borrow $2,180,000 to complete the project. It therefore decides to issue $2,180,000 of 10%, 10-year bonds. These bonds were issued on January 1, 2016, and pay interest annually on each January 1. The bonds yield 9%.
Prepare the journal entry to record the issuance of the bonds on January 1, 2016.
Prepare a bond amortization schedule up to and including January 1, 2020, using the effective interest method.
Assume that on July 1, 2019, Swifty Co. redeems half of the bonds at a cost of $1,156,700 plus accrued interest. Prepare the journal entry to record this redemption.