Bond Issuance and Retirement
A Dutch company reports a total amount of outstanding longterm debt of million on
December The company's controller is looking at two of his company's bond issues
on January and January respectively. The total carrying value of these bonds
on December is million. This amount can be specified as follows:
Both bonds have a remaining term of years. Interest is paid annually
What were the bond issue proceeds received by the company on January and
January
Calculate for the remaining term of years, for each year the interest paid, the interest
expense, and the carrying value of the two bonds.
Calculate the amortized part of the premiumdiscount for the bonds in Also give
the journal entry for recording the interest expense in that year.
Assume that on December the expected market rate of interest is The
company decides to repurchase the second bond issued in at the market price.
What could be a motivation to repurchase the bond? How does the repurchase looks
like?
