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Andarex is a public company that follows US GAAP for its financial reporting. Andarex’s fiscal year...

Andarex is a public company that follows US GAAP for its financial reporting. Andarex’s fiscal year is the same as the calendar year. Andarex issued $20,000,000 in three-year bonds on January 1, 2017 maturing on January 1, 2020. The coupon rate is 8% and interest is payable each January 1 and July 1 starting on July 1, 2017. The bonds were priced to yield the market rate of 6% on similar bonds. Andarex uses the effective interest method in accounting for its bonds.

Required:

  1. Calculate the issue price of the bonds based on the appropriate PV calculations.
  2. Prepare an amortization schedule for the bonds for their entire life (six semiannual periods.) Hint: follow the format of the amortization table in your slides.
  3. Prepare the journal entries necessary for 2017 (Hint: there are three: issuance, first interest payment date and any adjusting entry needed at 12/31/17).
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