On January 1 of Year 1, Lily Company issued a $10,000, 10%, 20-year bond. Interest is paid annually each December 31, so the first coupon payment was made on December 31 of Year 1. On the day the bond was issued, the market interest rate on bonds with the same degree of riskiness was 12% compounded annually. The issue price of the bond was $8,506. This bond was retired on January 1 of Year 3, just one day after the second coupon payment was made. The carrying value of the bond at the time of retirement was $8,550. The total amount paid to retire this bond was $9,700. Lily uses the effective-interest method on its books. The entry to record the retirement of this bond would include a DEBIT to Premium on Bonds of $1,450 DEBIT to Loss on Bond Retirement of $1,150 DEBIT to Discount on Bonds of $1,550 CREDIT to Discount on Bonds of $1,250 CREDIT to Premium on Bonds of $1,450 DEBIT to Loss on Bond Retirement of $1,450 CREDIT to Discount on Bonds of $1,650 DEBIT to Premium on Bonds of $1,538