Question

Problem 14-2 Splish Co. is building a new hockey arena at a cost of $2,560,000. It received a downpayment 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%.

Your answer is partially correct. Try again. Assume that on July 1, 2019, Splish Co. redeems half of the bonds at a cost of $1,110,800 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, 2019 (To record interest) July 1, 2019 (To record reacquisition)

Answer 1

Date	Account		Debit	Credit
Jan.1	2019	Cash		$       2,248,750
		Premium on bonds payable			$          138,750
		Bonds payable			$       2,110,000
		[bonds issued at premium]
July.1	2019	Interest expense		$          123,681
		Premium on bonds payable		$              2,919
		Cash			$          126,600
		[Interest paid]
July.1	2019	Bonds payable		$       1,055,000
		Premium on bonds payable		$            67,916
		Gain on redemption of bonds			$            12,116
		Cash			$       1,110,800
		[Record reacquisition]

Bond price was:

Particulars	Cash flow	Discount factor	Discounted cash flow
present value Interest payments-Annuity (5.5%,24 periods)	$               126,600.00	13.15170	$     1,665,005.09
Present value of bond face amount -Present value (5.5%,24 periods)	$            2,110,000.00	0.27666	$        583,745.34
Bond price			$     2,248,750.42
Face value			$     2,110,000.00
Premium/(Discount)			$        138,750.42
Interest amount:
Face value	2,110,000
Coupon/stated Rate of interest	12.000%
Frequency of payment(once in)	6 months
Interest amount	2110000*0.12*6/12=		$        126,600.00
Present value calculation:
yield to maturity/Effective rate	11.00%
Effective interest per period(i)	0.11*6/12=		5.500%

Please rate.