Question

Sheffield Co. is building a new hockey arena at a cost of $2,630,000. It received a downpayment of $520,000 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, 2019, and pay interest annually on each January 1. The bonds yield 11%. Sheffield paid $50,000 in bond issue costs related to the bond sale.
Required:
(a) Prepare the journal entry to record the issuance of the bonds and the related bond issue costs incurred on January 1, 2019.
(b) Prepare a bond amortization schedule up to and including January 1, 2023, using the effective-interest method.

Answer 1

Answer:

Explanation:

a.

Prepare the journal entry to record the issuance of the bonds on January 1, 2019.

Accounting homework question answer, step 1, image 1

Accounting homework question answer, step 1, image 2

Step 2

b.

Prepare a bond amortization schedule up to and including January 1, 2023, using the effective-interest method.

The file attached below has the calculations