Question

Novak Ltd. sold $6,430,000 of 10% bonds, which were dated March 1, 2020, on June 1, 2020. The bonds paid interest on September 1 and March 1 of each year. The bonds' maturity date was March 1, 2030, and the bonds were issued to yield 12%. Novak's fiscal year-end was February 28, and the company followed IFRS. On June 1, 2021, Novak bought back $2,430,000 worth of bonds for $2,330,000 plus accrued interest.

1 )

Using 1. a financial calculator, or 2. Excel function PV, calculate the issue price of the bonds and prepare the entry for the issuance of the bonds. (Hint: Use the account Interest Payable in your entry). (Round answer to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

2)

Prepare the journal entry for the scheduled interest payment on September 1, 2020. (Round answer to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

3)

Prepare any year-end entry required at February 28, 2021. (Round answer to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

4)

Prepare the entry required for the redemption of face value $2,430,000 of the bonds on June 1, 2021. (Round answer to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Answer 1