Question

On June 30, 2006, County Company issued 12% bonds with a parvalue of $827,200 due in 20 years. They were issued at 99 and werecallable at 104 at any date after June 30, 2014. Because of lowerinterest rates and a significant change in the company’s creditrating, it was decided to call the entire issue on June 30, 2015,and to issue new bonds. New 10% bonds were sold in the amount of$1,016,000 at 101; they mature in 20 years. County Company usesstraight-line amortization. Interest payment dates are December 31and June 30. (a) Prepare journal entries to record (1) theredemption of the old issue and (2) the sale of the new issue onJune 30, 2015. (b) Prepare the entry required on December 31, 2015,to record the payment of the first 6 month’s interest and theamortization of premium on the bonds.