Twilight corp desired to raise cash to fund its expansion by issuing long term bonds. The corporation hired an investment banker to manage the issue. On June 1, 2014, twilight sold $500,000 in long term bonds. The bonds will mature in 10 years and have a stated interest rate of 8%. Other bonds that Twilight has issued with identical terms are traded based on a market to be accounted for using the effective interest method. On June 1, 2016 twilight decided to retire 20% of the bonds. At that time, the bond were selling at 98.
a. prepare journal entry for June 1, 2014
b. Prepare a bond amortization table for showing the first 4 interest payment periods. What was the interest expense related to these bonds that would be reported on twilight’s calendar 2014 income statement
c. Prepare all entries from after the issue of the bond till December 31, 2014
d. Calculate the gain or loss on the partial retirement of the bonds on June 1, 2016
e. Prepare the journal entries to record the partial retirement on June 1, 2016