On July 1, 2020, Davis Corp. issued 10-year, 800 Bonds, ParValue $1,000 each, Bonds carry 10% coupon rate, with interestpayable semi-annually on January 1 and July 1. Thebonds were issued for $ 908,722. On January 2, 2022, Davis offeredto buy back the bonds at 103. Forty percent (40%) of thebondholders accepted the offer. Davis uses theeffective-interest method of amortizing premium ordiscount.
Instructions
a) Prepare the journal entry to recordthe bond issuance.
b) Prepare the adjusting entry atDecember 31, 2020, the end of the fiscal year and the payment onJan 1, 2021
c) What is the interest amount Daviswill report for the year ended Dec 31, 2021.
d) What is the total cost of borrowing over the life of thebond?
e) Show the proper presentation for the Bonds on the Statementof Financial Position (Balance sheet) for Davis co. as of Dec 31,2021.
f) Prepare the entry torecord the retirement of the bonds for the 40% who accept the offeron January 2, 2022.
Round all values to the nearest dollar. ( Hint: youneed to calculate the EIR)
