1, 2023. Interest is payable on January 1 and July 1 each year. The bonds sell for $7,369,493 plus accrued interest.
In mid-June, Great Advice earns an unusually large fee of $10,000,000 for one of its cases. The firm uses part of the proceeds to buy back the bonds in the open market on July 1, 2023, after the interest payment has been made. Great Advice pays a total of $7,443,012 to reacquire the bonds and retires them.
Required:
a. Prepare the journal entry to record the issuance of the bonds on May 1, 2023. Assume that Great Advice has adopted a policy of crediting interest expense for the accrued interest on the date of sale.
b. Prepare the journal entry to record the payment of interest and related amortization on July 1, 2023.
c. Prepare the journal entry to record the reacquisition and retirement of the bonds.