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Question 3 ( 70 Marks)
Honey Ltd. sold $2,500,000 of 4% bonds on January 1, 2021. The bonds pay interest on December 31 every year. The bonds' due date is December 31, 2024. The bonds yield 6%.
REQUIRED:
a. Prepare the journal entry to record the issuance of the bonds on January 1, 2021. (2 Marks)
b. Prepare a bond amortization schedule for the life of the bond using the effective interest method.
(2 Marks)
c. Prepare the December 31, 2022 journal entry to record the second interest payment using the effective interest method. (2 Marks)
d. Assume that on August 1, 2023, Honey buys back $600,000 worth of bonds for $500,000 plus accrued interest. Prepare the journal entries (interest
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Question 3 ( 70 Marks)
Honey Ltd. sold $2,500,000 of 4% bonds on January 1, 2021. The bonds pay interest on December 31 every year. The bonds' due date is December 31, 2024. The bonds yield 6%.
REQUIRED:
a. Prepare the journal entry to record the issuance of the bonds on January 1, 2021. (2 Marks)
b. Prepare a bond amortization schedule for the life of the bond using the effective interest method.
(2 Marks)
c. Prepare the December 31, 2022 journal entry to record the second interest payment using the effective interest method. (2 Marks)
d. Assume that on August 1, 2023, Honey buys back $600,000 worth of bonds for $500,000 plus accrued interest. Prepare the journal entries (interest