On June 30, 2009 Lancaster Company 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.