issued 12% bonds with a par value of $800,000 due in 20 years at 98. The bonds were callable at 104 at any date after June 30, 2017. Because of low interest rates and a significant positive change in the companys credit ratings, it was decided by the company to call the entire issue on June 30, 2018 and to issue new bonds.

New 10% bonds with par value of $1,000,000 were sold at 102 on June 30, which will mature in 20 years. Lancaster Company uses straight-line amortization of bond premium or discount. Interest payment dates are December 31 and June 30.

1. Prepare journal entries to record the redemption of the old issue of $800,000 bonds and the sale of the new issue of $1,000,000 bonds on June 30, 2018. Show your calculations as far as possible.

2. Prepare journal entries to record the interest expense, interest payment and premium amortization for new bonds on December 31, 2018.