On January 2, 2012, Prebish Corporation issued \($1\),500,000 of 10% bonds to yield 11% due December 31, 2021. Interest on the bonds is payable annually each December 31. The bonds are callable at 101 (i.e., at 101% of face amount), and on January 2, 2015, Prebish called \($1\),000,000 face amount of the bonds and retired them.

Instructions

(a) Determine the price of the Prebish bonds when issued on January 2, 2012.

(b) Prepare an amortization schedule for 2012–2016 for the bonds.

(c) Ignoring income taxes, compute the amount of loss, if any, to be recognized by Prebish as a result of retiring the \($1\),000,000 of bonds in 2015 and prepare the journal entry to record the retirement.