1-On January 1, 2015, Splash City issues $340,000 of 6% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. The market interest rate on the issue date is 7% and the bonds issued at $303,697

Using an amortization schedule, show that the bonds have a carrying value of $305,506 on December 31, 2016.

2-

If the market interest rate drops to 6% on December 31, 2016, it will cost $340,000 to retire the bonds. Record the retirement of the bonds on December 31, 2016.

Journal Entry Worksheet

On January 1, 2015, Splash City issues $340,000 of 6% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. The market interest rate on the issue date is 7% and the bonds issued at $303,697. If the market interest rate drops to 6% on December 31, 2016, it will cost $340,000 to retire the bonds. Record the retirement of the bonds on December 31, 2016.