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On June 30, 2009, Splish Company issued 12% bonds with a par value of $790,000 due in 20 years. They were issued at 98 and
On June 30, 2009, Splish Company issued 12% bonds with a par value of $790,000 due in 20 years. They were issued at 98 and were callable at 104 at any date after June 30, 2017. Because of lower interest rates and a significant change in the companys credit rating, it was decided to call the entire issue on June 30, 2018, and to issue new bonds. New 8% bonds were sold in the amount of $900,000 at 101; they mature in 20 years. Splish Company uses straight-line amortization. Interest payment dates are December 31 and June 30.
(a) | Prepare journal entries to record the redemption of the old issue and the sale of the new issue on June 30, 2018. | |
(b) | Prepare the entry required on December 31, 2018, to record the payment of the first 6 months interest and the amortization of premium on the bonds. |
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