B & B Railway Corporation issued $20,000,000 of 9 percent,20-year bonds at a premium.The bonds are redeemable prior to maturity at 105.The unamortized premium was $314,000 at this time.B & B Railway Corporation amortizes bond premiums using the effective-interest method.The Investwide Mutual Fund holds one-half of the bonds in their popular World-Wide Bond Fund.They decided to redeem all of the B & B Railway Bonds after a bond rating agency reduced the investment risk rating on the bonds.
a_Would the change in the investment risk rating on the bonds have an impact on the bonds stated interest rate? Explain.
b_Prepare the journal entry to record the retirement of 100% of the bonds.

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The Answer of B & B Railway Corporation issued $20,000,000 of 9 percent,20-year bonds at a premium.The bonds are redeemable prior to maturity at 105.The unamortized premium was $314,000 at this time.B & B Railway Corporation amortizes bond premiums using the effective-interest method.The Investwide Mutual Fund holds one-half of the bonds in their popular World-Wide Bond Fund.They decided to redeem all of the B & B Railway Bonds after a bond rating agency reduced the investment risk rating on the bonds.
a_Would the change in the investment risk rating on the bonds have an impact on the bonds stated interest rate? Explain.
b_Prepare the journal entry to record the retirement of 100% of the bonds.

B & B Railway Corporation Issued $20,000,000 of 9 Percent,20-Year