question1 The balance sheet of Indian River Electronics Corporation as of December 31, 2020, included 13.25%...

question1

The balance sheet of Indian River Electronics Corporation as of December 31, 2020, included 13.25% bonds having a face amount of $90.4 million. The bonds had been issued in 2013 and had a remaining discount of $3.4 million at December 31, 2020. On January 1, 2021, Indian River Electronics called the bonds before their scheduled maturity at the call price of 104.

Required:
Prepare the journal entry by Indian River Electronics to record the redemption of the bonds at January 1, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

Question 2

The Bradford Company issued 12% bonds, dated January 1, with a face amount of $97 million on January 1, 2021. The bonds mature on December 31, 2030 (10 years). For bonds of similar risk and maturity, the market yield is 14%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Required:
1. Determine the price of the bonds at January 1, 2021.
2. to 4. Prepare the journal entries to record their issuance by The Bradford Company on January 1, 2021, interest on June 30, 2021 and interest on December 31, 2021 (at the effective rate).
a. Record the bond issuance by the Bedford Company.

b. Record the interest on June 30,2021(at the effective rate)

C. Record the interest on December 31,2021( at the effective rate).

Expert Solution

Q1.
Journal entries:
S.no.	Accounts title and explanations		Debit $	Credit $
01.01.21	Bonds payable			9,04,00,000
	Loss on retirement of bonds		70,16,000
	Cash account (90400,000*104%)		94016000
	Discount on bonds payable			34,00,000
	(for retirement of bonds)

Q2.
Price of bonds
Semi annual cash interest = 97000,00012.00%6/12 =	5820000

n = 20
I = 7%
Cash flows		Amount	PVf	Present Value
Semi annual cash interest	58,20,000	10.594	61657080
Maturity amount		9,70,00,000	0.258419	25066643
Price of bonds				86723723


Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
01.01.21	Cash account			86723723
	Discount on bonds payable		10276277
	Bonds payable				9,70,00,000
	(for bonds issued)
30.06.21	Interest expense			6070661
	Cash account				5820000
	Discount on bonds payable			250661
	(for interest expense)
31.12.21	Interest expense			6088207
	Cash account				5820000
	Discount on bonds payable			268207
	(for interest expense)


Note:
Amort Chart:
Date	Cash Int	Int exp	Discount	unamortized	Carrying
			amortized	discount	value
01.01.21				10276277	86723723
30.06.21	5820000	6070661	250661	10025616	86974384
31.12.21	5820000	6088207	268207	9757409	87242591

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