Problem 14-2 (Part Level Submission) Novak Co. is building a new hockey arena at

Question

Problem 14-2 (Part Level Submission) Novak Co. is building a new hockey arena at a cost of $2,600,000. It received a downpayment of $460,000 from local businesses to support the project, and now needs to borrow $2,140,000 to complete the project. It therefore decides to issue $2.140 000 of 12% 10-year bonds. These bonds were issued on anuary 1 2016, and pay interest annually on each anuary·The bonds yield 11%. ? (a) 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 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 Date Account Titles and Explanation Debit Credit January 1, 2016 Unamortized Bond Issue Costs Premium on Bonds Payable

Explanation / Answer

Issue bonds price = (2140000*12%*5.88923)+(2140000*0.35218) = 2266019

Journal entry :

Date accounts & explantion debit credit Jan 1,2016 Cash 2266019 Bonds payable 2140000 Premium on bonds payable 126019 (To record issue bonds payable)

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