Question

Sunland Co. is building a new hockey arena at a cost of $2,620,000. It received a downpayment of $530,000 from local businesses to support the project, and now needs to borrow $2,090,000 to complete the project. It therefore decides to issue $2,090,000 of 11%, 10-year bonds. These bonds were issued on January 1, 2019, and pay interest annually on each January 1. The bonds yield 10% Your answer is partially correct Prepare the journal entry to record the issuance of the bonds on January 1, 2019. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to decimal places eg. 58,971. If no entry is required, select "No Entry for the account titles and enter for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Credit Date January 1, 2019 Account Titles and Explanation | Cash Premium on Bonds Payable Bonds Payable

Answer 1

	Maturity value of bonds payable	$2,090,000
				Year	Cashflow	Present value factors @10%	Present Value
				1	$229,900	0.90909	$209,000
				2	$229,900	0.82645	$190,001
				3	$229,900	0.75131	$172,726
				4	$229,900	0.68301	$157,024
				5	$229,900	0.62092	$142,750
				6	$229,900	0.56447	$129,772
				7	$229,900	0.51316	$117,975
				8	$229,900	0.46651	$107,251
				9	$229,900	0.42410	$97,501
				10	$2,319,900	0.38554	$894,414
							$2,218,413
Date	Journal entry	Debit	Credit
jan 1 2019	Cash	$2,218,413
	Premium on Bonds payable		$128,413
	Bonds payable		$2,090,000
	(to record bond issue)
	Amortization table
		Date	Cash paid	Interest expense	Premium amortization	Carrying amount of bonds
		01/01/2019	0	0	$0	$2,218,413
		01/01/2020	$229,900	$221,841.29	$8,059	$2,210,354	(2218413-8059)
		01/01/2021	$229,900	$221,035.42	$8,865	$2,201,490	(2210354-8865)
		01/01/2022	$229,900	$220,148.97	$9,751	$2,191,739	(2201490-9751)
		01/01/2023	$229,900	$219,173.86	$10,726	$2,181,012	(2191739-10726)

Redemption entry

Date	Journal entry	Debit	Credit
01-Jul-22	Interest expense	$54,793.47		(2,191,739*10%*1/2*6/12)
	Premium on bond payable		$2,682
	Cash		$57,475

*Only first sub-part has been solved.