Legally Yours,a Law Firm,sells $8,000,000 of Four-Year,8% Bonds Priced to Yield

question 68

Essay

Legally Yours,a law firm,sells $8,000,000 of four-year,8% bonds priced to yield 6.6%.The bonds are dated January 1,2011,but due to some regulatory hurdles are not issued until March 1,2011.Interest is payable on January 1 and July 1 each year.The bonds sell for $8,388,175 plus accrued interest.
In mid-June,Legally Yours earns an unusually large fee of $11,000,000 for one of its cases.They use part of the proceeds to buy back the bonds in the open market on July 1,2011 after the interest payment has been made.Legally Yours pays a total of $8,456,234 to reacquire the bonds and retires them.
Required:
Prepare journal entries to record:
a.The issuance of the bonds-assume that Legally Yours has adopted a policy of crediting interest expense for the accrued interest on the date of sale.
b.Payment of interest and related amortization on July 1,2011.
c.Reacquisition and retirement of the bonds.

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Definitions:

Assessment

The process of evaluating or estimating the nature, ability, or quality of something, often used in educational, health, or work contexts.

Planning

The process of making plans for something, including setting goals, defining steps, and allocating resources to achieve those goals.

Diagnosis

The identification of the nature and cause of a disease or condition through examination of symptoms and often diagnostic tests.

Structure Evaluation

The process of assessing the arrangement, condition, or effectiveness of a physical or organizational structure.