Holiday Company issued its 9%, 25-year mortgage bonds in theprincipal amount of $3,261,000 on January 2, 1996, at a discount of$165,000, which it proceeded to amortize by charges to expense overthe life of the issue on a straight-line basis. The indenturesecuring the issue provided that the bonds could be called forredemption in total but not in part at any time before maturity at104% of the principal amount, but it did not provide for anysinking fund.

On December 18, 2010, the company issued its 11%, 20-yeardebenture bonds in the principal amount of $4,253,000 at 102, andthe proceeds were used to redeem the 9%, 25-year mortgage bonds onJanuary 2, 2011. The indenture securing the new issue did notprovide for any sinking fund or for retirement before maturity.

Prepare journal entries to record the issuance of the 11% bondsand the retirement of the 9% bonds.

BondsPayable 3,261,000

Loss on Redemption of Bonds 229,440

Cash 3,391,440

Discount on Bonds Payable 99,000

(To record retirement ofbonds.)

Thank you in advance for your help, having some difficultywith the numbers in Red.