On January 1, 2021, 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 $303,696.

If the market interest rate drops to 6% on December 31, 2022, it will cost $340,000 to retire the bonds. Record the retirement of the bonds on December 31, 2022.

Journal entry worksheet