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Prepare the journal entry micro would record assuming

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MICRO Ltd, which has a December 31 year-end, recently entered into an agreement for the construction of a new warehouse in China. The state-of- the-art building is estimated to cost $17,000,000. MICRO will issue an $18,000,000 ten-year bond issue will an interest rate of 6% on a semi-annual basis. When the bond was issued market interest rates were 7%. The bond was sold on July 1, 2020 to yield market rates. Interest is paid on December 31 and June 30th.

Required:

Question a) Need journal entry for the issuance of the bond on July 1, 2020.

Question b) All journal entries for 2021 assuming the company uses the effective interest method in accounting for bond transactions.

Question c) On January 1, 2022, market interest rates had climbed to 10%. The bondholder of MICRO's bond is experiencing financial troubles and has therefore asked management of MICRO whether it might consider redeeming the bonds. Prepare the journal entry MICRO would record assuming it agreed to redeem the bonds on January 1, 2022.

Reference no: EM132547841

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