On April 30, 2008, Company issued 9% bonds with a par value of $700,000 due in 20 years. They were issued at 101.8 to yield 8% and were callable at 102 at any date after April 30, 2016. Because of lower interest rates and a significant change in the companys credit rating, it was decided to call the entire issue on April 30, 2017 and to issue new bonds. On April 30, 2017 the unamortized premium of the old bonds is $3,480. New 6% bonds were sold in the amount of $600,000 at 92.42 to yield 7%; they mature in 20 years. Interest payment dates are October 31 and April 30 for both old and new bonds.

Instructions

(a) Prepare journal entries to record the retirement of the old issue and the sale of the new issue on April 30, 2017.

(b) Prepare the entry required on October 31, 2017, to record the payment of the first 6 months interest and the amortization of premium on the bonds.