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Teal Co. is building a new hockey arena at a cost of $2,750,000. It received a...

Teal Co. is building a new hockey arena at a cost of $2,750,000. It received a downpayment of $350,000 from local businesses to support the project, and now needs to borrow $2,400,000 to complete the project. It therefore decides to issue $2,400,000 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.
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Answer #1
Date Account Titles Debit Credit
January 1 Cash 2554022
      Bonds payable 2400000
      Premium on Bonds payable 154022
Workings:
Amount PV factor 9% Present value
Semi-annual interest 240000 6.41766 1540238
Principal 2400000 0.42241 1013784
Total 2554022
PV factor 9%
Semi-annual interest 6.41766 =(1-(1.09)^-10)/0.09
Principal 0.42241 =1/1.09^10
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