EARLY RETIREMENT OF NOTES. On July 1, 19x1, O’Bryans Wholesale Distributors issued for $506,000 a number of 5-year, 7.8% notes with a total face amount of $500,000. The notes pay interest semiannually. Following is a portion of the note liability table prepared at that time:

On June 30, 19x3, O’Bryans redeemed all the notes at their call price of 100.4% of the face amount, or $502,000.
REQUIRED:
1. Prepare the entry to recognize the interest expense for the period ended June 30, 19x3.
2. Prepare the note retirement entry.

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INTEREST PERIOD INTEREST ENDING EXPENSE CASH PAYMENT CHANGE IN LIABILITY BALANCE LIABILITY BALANCE At issue $506,000 12/31/x1 $18,900 $19.500 -600 505,400 6/30/x2 18,900 19,500 -600 504,800 12/31/x2 18,900 19,500 -600 504,200 6/30/x3 18,900 19,500 -600 503,600