Marigold Co. is building a new hockey arena at a cost of $2,600,000. It received
ID: 2408166 • Letter: M
Question
Marigold 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%.
Prepare the journal entry to record the issuance of the bonds on January 1, 2016. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. 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.)
Date
Account Titles and Explanation
Debit
Credit
January 1, 2016
Assume that on July 1, 2019, Marigold Co. redeems half of the bonds at a cost of $1,126,600 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.)
Date
Account Titles and Explanation
Debit
Credit
July 1, 2019
(To record interest)
July 1, 2019
(To record reacquisition)
Date
Account Titles and Explanation
Debit
Credit
January 1, 2016
Explanation / Answer
Journal entries par value of Bonds 2140000 Stated rate of interest 12% Market rate of interest 11% Annual Interest paid 256800 Annuity factor for 10 yrs at 11% 5.8892 Present value factor for Yr-10 0.3522 Present value of interest 1512347 Present value of maturity value 753708 Issue price 2266055 Journal entry: Jan 12016 Cash account Dr. 2266055 Bonds payable Account 2140000 Premium on Bonds payable 126055 Journal entries: July 12019 Interest expense (246496*6/12*1/2) 61624 Premium on Bonds payable (10304/2*6/12) 2576 Interest payable 64200 July 12019 Bonds payable 1070000 Premium on Bonds payable (100875/2 -2576) 47862 Interest payable 64200 Loss on retirement of bonds 8738 Cash account (1126600+64200) 1190800 Amort Chart Year Cash int Int exp Premium Unamotized Carrying Value Amortized Premium Jan12016 126055 2266055 31.12.16 256800 249266 7534 118521 2258521 31.12.17 256800 248437 8363 110158 2250158 31.12.18 256800 247517 9283 100875 2240875 31.12.19 256800 246496 10304 90571 2230571
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.