Reference no: EM132719181

Question - On January 1st, 2000 the Rahel S. Abate Corporation sold 20,000 of its 12.0%, 25-year, $1,000 face value bond to yield 10.0% annually, interest is paid semiannually. Interest payment dates are June 30th and December 31 of each year. The company uses the effective interest method to amortize any bond discounts or premiums. The issuing cost incurred were $500,000, they are to be amortized straight line over the estimated useful life of the bond. On July 01st, 2014, the Rahel S. Abate Corporation retires 6,000 of its bonds through an open market purchase (it repurchases them for cash). At that time the bonds were quoted on the market at a price of 103. Sunny Gavaskar, the Toronto industrialist, had purchased the bonds. Expense/amortize the bond issue cost to Interest Expense

Required -

1. Calculate the cash received from the sale of the bonds

2. Prepare the journal entries on the books of the Rahel S. Abate Corporation to record the following January 01st, 2000: issuance of the bonds (Gross or Net Method is acceptable).

3. Prepare the journal entries on the books of the Rahel S. Abate Corporation to record the following Payments of interest for the year 2000, and any other amortization

4. Prepare the journal entries on the books of the Rahel S. Abate Corporation to record the following July 01st, 2014, the extinguishment of 6,000 bonds.

5. Payments of interest for December 31st ,2014, and any other amortization

6. Prepare the accounting entry on July 01st, 2014 if the policy of the Rahel S. Abate Corporation had been to carry the bonds at fair market value.