Question

Pina Co. is building a new hockey arena at a cost of $2,360,000. It received a downpayment of $510,000 from local businesses to support the project, and now needs to borrow $1,850,000 to complete the project. It therefore decides to issue $1,850,000 of 11%, 10-year bonds. These bonds were issued on January 1, 2019, and pay interest annually on each January 1. The bonds yield 10%.

Prepare the journal entry to record the issuance of the bonds on January 1, 2019. (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, 2019

Prepare a bond amortization schedule up to and including January 1, 2023, using the effective interest method. (Round answers to 0 decimal places, e.g. 38,548.)

Date		Cash Paid		Interest Expense		Premium Amortization		Carrying Amount of Bonds
1/1/19		$		$		$		$
1/1/20
1/1/21
1/1/22
1/1/23

Assume that on July 1, 2022, Pina Co. redeems half of the bonds at a cost of $1,014,800 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, 2022
	(To record interest)
July 1, 2022
	(To record reacquisition)

Answer 1

a)
	Present value of principal payment (0.386*18,50,000)	7,14,100
	Present value of interest payment (6.145*2,03,500)	12,50,508
	Total Present value (7,14,100+12,50,508)	19,64,608
	Cash	19,64,608
	Bonds Payable		18,50,000
	Premium on Bonds Payable		1,14,608
b)	Bond Amortisation schedule
	Date	Cash paid	Interest expense	Premium Amortisation	Carrying amount of bonds
	01-01-2019				19,64,608
	01-01-2020	2,03,500	1,96,460.75	7,039.25	19,57,568.25
	01-01-2021	2,03,500	1,95,756.83	7,743.17	19,49,825.08
	01-01-2022	2,03,500	1,94,982.51	8,517.49	19,41,307.58
	01-01-2023	2,03,500	1,94,130.76	9,369.24	19,31,938.34