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On April 30, 2002, Company issued 8% bonds with a par value of $900,000 due in 20 years. They were issued at 82.8 to yield

On April 30, 2002, Company issued 8% bonds with a par value of $900,000 due in 20 years. They were issued at 82.8 to yield 10% and were callable at 102 at any date after April 30, 2010. Because of lower interest rates and a significant change in the company's credit rating, it was decided to call the entries issue on April 30, 2011, and to issue new bonds. New 6% bonds were sold in the amount of $1,200,000 at 112.5 to yield 5%; they mature in 20 years. Interest payment dates are October 31 and April 30 for both and new bonds.

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(a) Prepare journal entries to record the retirement of the old issue and the sale of the new issue on April 30, 2011. Unamortized discount is $118,470. (20 marks)

(b) Prepare the entry required on October 31, 2011, to record the payment of the first 6 months' interest and the amortization of premium on the bonds. (10 marks)

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