Pearl Co

Accounting Aug 05, 2020

Pearl Co. is building a new hockey arena at a cost of $2,560,000. It received a down payment of $450,000 from local businesses to support the project, and now needs to borrow $2,110,000 to

complete the project. It therefore decides to issue $2,110,000 of 12%, 10-year bonds. These bonds were issued on January 1, 2016, and pay interest annually on each January 1. The bonds yield 11%.

A)Prepare the journal entry to record the issuance of the bonds on January 1, 2016 (see image)

B) Complete the bond amortization schedule up to and including January 1, 2020, using the effective interest method (see image).

C) Assume that on July 1, 2019, Pearl Co. redeems half of the bonds at a cost of $1,110,800 plus accrued interest. Prepare the journal entry to record this redemption (see image).

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