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  3. 4.7 bond issuance and retirement a dutch company

4.7 Bond Issuance and Retirement A Dutch company reports a total amount of...

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Accounting

4.7 Bond Issuance and Retirement
A Dutch company reports a total amount of outstanding long-term debt of 6,455 million on
December 31,2013. The company's controller is looking at two of his company's bond issues
on January 1,2011 and January 1,2006, respectively. The total carrying value of these bonds
on December 31,2013, is 5,260 million. This amount can be specified as follows:
Both bonds have a remaining term of 7 years. Interest is paid annually
What were the bond issue proceeds received by the company on January 1,2011 and
January 1,2006?
Calculate for the remaining term of 7 years, for each year the interest paid, the interest
expense, and the carrying value of the two bonds.
Calculate the amortized part of the premium/discount for the bonds in 2016. Also give
the journal entry for recording the interest expense in that year.
Assume that on December 31,2019, the expected market rate of interest is 6%. The
company decides to repurchase the second bond (issued in 2006) at the market price.
What could be a motivation to repurchase the bond? How does the repurchase looks
like?
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