# Question & Answer: Larkspur Co. is building a new hockey arena at a cost of \$2,750,000. It received a downpayment of \$470,000 from local busi…..

Larkspur Co. is building a new hockey arena at a cost of \$2,750,000. It received a downpayment of \$470,000 from local businesses to support the project, and now needs to borrow \$2,280,000 to complete the project. It therefore decides to issue \$2,280,000 of 10%, 10-year bonds. These bonds were issued on January 1, 2016, 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, 2016. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

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Date
Account Titles and Explanation
Debit
Credit
January 1, 2016

Prepare a bond amortization schedule up to and including January 1, 2020, using the effective interest method. (Round answers to 0 decimal places, e.g. 38,548.)

Date
Cash
Paid
Interest
Expense
Amortization
Carrying
Amount of
Bonds
1/1/16 \$
\$
\$
\$
1/1/17
1/1/18
1/1/19
1/1/20

Assume that on July 1, 2019, Larkspur Co. redeems half of the bonds at a cost of \$1,222,500 plus accrued interest. Prepare the journal entry to record this redemption. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit
July 1, 2019
(To record interest)
July 1, 2019
(To record reacquisition)