Culver Co. is building a new hockey arena at a cost of $2,360,000. It received...
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Culver 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, 2016, and pay interest annually on each January 1. The bonds yield 10%.
1) Prepare the journal entry to record the issuance of the bonds on January 1, 2016.
2) Prepare a bond amortization schedule up to and including January 1, 2020, using the effective interest method.
3) Assume that on July 1, 2019, Culver Co. redeems half of the bonds at a cost of $1,014,800 plus accrued interest. Prepare the journal entry to record this redemption.
Date Account Titles and Explanation Debit Credit January 1, 2016
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