Question

Grouper Co. is building a new hockey arena at a cost of $2,510,000. It received a downpayment of $490,000 from local businesses to support the project, and now needs to borrow $2,020,000 to complete the project. It therefore decides to issue $2,020,000 of 10%, 10-year bonds. These bonds were issued on January 1, 2019, and pay interest annually on each January 1. The bonds yield 9%.

Prepare the journal entry to record the issuance of the bonds on January 1, 2019. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
January 1, 2019

Prepare a bond amortization schedule up to and including January 1, 2023, using the effective interest method. (Round answers to 0 decimal places, e.g. 38,548.)

Date		Cash Paid		Interest Expense		Premium Amortization		Carrying Amount of Bonds
1/1/19		$		$		$		$
1/1/20
1/1/21
1/1/22
1/1/23

Assume that on July 1, 2022, Grouper Co. redeems half of the bonds at a cost of $1,079,300 plus accrued interest. Prepare the journal entry to record this redemption. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
July 1, 2022
	(To record interest)
July 1, 2022
	(To record reacquisition)

Answer 1

Answer:

Present value of the principal = $2,020,000 × 0.42241

       = $8,53,268 (1)

(PV of $1 for 10 periods at 9% = 0.42241)

Present Value of Interest = $2,020,000*10%*6.41766

                                       = $1,296,367 (2)

(PV of a $1 anuity for 10 periods at 9% = 6.41766)    

Present Value of Bonds (1+2) = 2,149,635

Journal entry to record the issuance of the bonds on January 1, 2019

Cash                                                           Dr.    $2,149,635

          To Bond Payable                                                           $2,020,000

          To Premium Bond Payable                                               $129,635

Bond amortization schedule up to and including January 1, 2023, using the effective interest method

Date	Cash paid	Interest Expenses	Premium Amortization	Carrying amount of Bond
1/1/19	0	0	0	$2,149,635
1/1/20	202,000	$214,964	$12,964	$2,136,671
1/1/21	202,000	$213,667	$11,667	$2,125,004
1/1/22	202,000	$212,500	$10,500	$2,114,504
1/1/23	202,000	$211,450	$9,450	$2,105,054

Since, there were multiple questions, i am supposed to answer only first question.