Reacquisition of Bonds
Gerona Company authorized the sale of $300,000 of 10%, 10 year debentures on January 1, 2003. Interest is payable on January 1 and July 1. The entire issue was sold on April 1, 2003, at 103 plus accrued interest. On April 1,2008,$100,000 of the bond issue was reacquired and retired at 99 plus accrued interest. On June 30, 2008, the remaining bonds were reacquired at 98 plus accrued interest and refunded with an issue of $200,000 of 9% bonds which were sold at 100.
Instructions: Give the journal entries for 2003 and 2008 (through June 30) on Gerona Company’s books. The company’s books are kept on a calendar year basis. (Round to the nearest dollar. Assume straight line amortization of the premium or discount. Ignore any potential impact of year to year market value changes on the accounting for the bonds.)