Bonds Retired before Maturity
Amity Construction Company issued $100,000 of 10% bonds on January 1, 2009. The maturity
date of the bonds is January 1, 2019. Interest is payable January 1 and July 1. The bonds

were sold at 111.4 on July 1, 2009. The company uses the straight-line method of amortizing
bond premiums and discounts.
Required:
1. Make the required journal entries for each of the following dates:
a. July 1, 2009.
b. December 31, 2009.
c. January 1, 2010.
d. July 1, 2010.
2. Because of a substantial decline in the market rate of interest, Amity Construction
Company purchased all the bonds on the open market at face value (100) on July 1,
2012. The following entry had just been made on that day:
Bond Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,400
Premium on Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Made semiannual interest payment on the bonds
and amortized bond premium for six months.
Prepare the journal entry to record the retirement of the bonds on July 1, 2012.