Corp. wanted to raise cash to fund its expansion by issuing long-term bonds. On June 1, 2019, Corp sold long-term bonds. The bonds will mature in 10 years. The bonds pay interest semi-annually on May 31 and November 30. The bonds are to be accounted for using the effective interest method. On August 1, 2021, Corp decided to retire a portion of the bond issue. Other information pertaining to the issuance and retirement of the bonds follows:
Face value of bonds: $458,000
Coupon rate 8%
Bond yield 9%
Percentage of bond issue that was retired 20%
Price at which retired bonds were repurchased 99
Assume that Corp. has a December 31 year end, and that the company pays any interest accrued at the time debt is retired.
Required: a) Prepare an amortization schedule for the first 2 years of the bond issue. b) Prepare the journal entry for the issuance of the bond on June 1, 2019. c) Prepare all journal entries after the issuance of the bond until December 31, 2019. d) Calculate the gain or loss on the partial retirement of the bonds on August 1, 2021. e) Prepare the journal entries to record the partial retirement of the bonds on August 1, 2021.
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