Journal entries to record retirement of old issue

Reference no: EM13143770

On June 30, 2002 Mendenhal Company issue 12% bonds with a par value of 600,000 due in 20 years. They were issued at 98 and were callabel at 104 at any date after June 30, 2010. Because of lower interest rates and significant change in the company's credit rating, it was decided to call the entire issue on June 30, 2011, and to issue new bonds. NEw 10% bonds were sold in the amount of 800,000 at 102; 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 the retirement of the old issue and the sale of the new issue on June 30, 2011

b) Prepare the entry required on December 31, 2011 to record the payment of the first 6 months interest and the amortization of premium on the bonds

Reference no: EM13143770

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