Question

Flint Co. is building a new hockey arena at a cost of $2,660,000. It received a downpayment of $450,000 from local businesses to support the project, and now needs to borrow $2,210,000 to complete the project. It therefore decides to issue $2,210,000 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 O decimal places e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Face Amount	$2,210,000
Interest Payment	$2,210,000*11% =$243,100
Market Interest rate per period	10.00%
Cash Flow	Table Value(PV of 10% for 10 years)	Amount	Present Value
PV of Interest	6.14457	$243,100	$1,493,745
PV of Principal	0.38554	$2,210,000	$852,043
PV of Bonds Payable(Issue Price)			$2,345,788
Date	Accounts and explanation	Debit(in $)	Credit(in $)
Jun 30,2017	Cash	$                                    2,345,788
	Bond Payable		$                                     2,210,000
	Premium on Bond Payable		$                                        135,788
	Col I	Col II	Col III	Col IV
Date	Cash Paid	Interest expenses(Col V*3%)	Premium amorrtization(Col I -Col II)	Bond carrying amount
Jan 1,2019				2,345,788
Jan 1,2020	243,100	234,579	8,521	2,337,267
Jan 1,2021	243,100	233,727	9,373	2,327,894
Jan 1,2022	243,100	232,789	10,311	2,317,583
Jan 1,2023	121,550	115,880	5,670	1,099,330
Interest expense accrued for 6 months period =$2,317,583*10%*6/12 =$115,880
Interest paid for 6 months =$121,550
Bond Premium amortized for 6 months =$121,550 - $115,880 =$5,670
Unamortized premium on Bond to be redeemed =$101,913/2 =$50,957
Date	Accounts and explanation	Debit(in $)	Credit(in $)
Jul 1,2022	Interest expenses	$                                       115,880
	Premium on Bond Payable	$                                           5,670
	Cash		$                                        121,550
July 1,2022	Bonds Payable	$1,105,000
	Premium on Bond payable	$50,957
	Loss on retirement of Bond	$16,443
	Cash		$1,172,400