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

Question

Problem 14-2 (Part Level Submission) Oriole Co. is building a new hockey arena at a cost of $2,310,000. It received a downpayment of $490,000 from local businesses to support the project, and now needs to borrow $1,820,000 to complete the project. It therefore decides to issue $1,820,000 of 12%, 10-year bonds. These bonds were issued on January 1, 2016, and pay interest annually on each January 1, 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 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.) Date Account Titles and Explanation Debit Credit January 1, 2016

Explanation / Answer

Amount PV factor Present value Semi annual interest 218400 5.88923 1286207.83 Principal 1820000 0.35218 640967.60 Issue price 1927175 Jan-1-16 Cash 1927175      Premium on bonds payable 107175      Bonds payable 1820000 Note: Answer for Cash and premium might vary +1

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