On June 30, 2004, Mendenhal Company issued 12% bonds with a par value of $622,100due in 20 years. They were issued at98and were callable at106at any date after June 30, 2012. Because of lower interest rates and a significant change in the company’s credit rating, it was decided to call the entire issue on June 30, 2013, and to issue new bonds. New10% bonds were sold in the amount of $824,800at102; they mature in 20 years. Mendenhal Company uses straight line amortization. Interest payment dates are December 31 and June 30.
| (a) | Prepare journal entries to record (1) the retirement of the old issue and (2) the sale of the new issue on June 30, 2013. | |
| (b) | Prepare the entry required on December 31, 2013, to record the payment of the first 6 months’ interest and the amortization of premium on the bonds. |