PA10-6 (Algo) (Supplement 10A) Recording Bond Issue, Interest Payments (Straight-Line Amortization), and Early Bond Retirement [LO 10-S1] On January 1, 2021, Loop Raceway issued 660 bonds, each with a face value of $1,000, a stated interest rate of 5 percent paid annually on December 31, and a maturity date of December 31, 2023. On the issue date, the market interest rate was 6 percent, so the total proceeds from the bond issue were $642,345. Loop uses the straight-line bond amortization method and adjusts for any rounding errors when recording interest in the final year. Required: 1. Prepare a bond amortization schedule. 2-5. Prepare the journal entries to record the bond issue, the interest payments on December 31, 2021 and 2022, the interest and face value payment on December 31, 2023 and the bond retirement. Assume the bonds are retired on January 1, 2023, at a price of 98.

1

Record the issuance of 660 bonds at face value of $1,000 each for $642,345.

2

Record the interest payment on December 31, 2021.

3

Record the interest payment on December 31, 2022.

4

Record the interest and face value payment on December 31, 2023.

5

Record the retirement of the bonds at a quoted price of 98, assuming the bonds are retired on January 1, 2023.

No	Date	General Journal	Debit	Credit
1	January 01, 2021	Cash	642,345
		Discount on Bonds Payable	17,655
		Bonds Payable		660,000
2	December 31, 2021	Interest Expense	38,885
		Discount on Bonds Payable		5,885
		Cash		33,000
3	December 31, 2022	Bonds Payable	660,000
		Income Tax Expense	38,885
		Discount on Bonds Payable		5,885
		Cash		693,000
4	December 31, 2023	Bonds Payable	660,000
		Discount on Bonds Payable		5,885
		Cash		654,000
		Gain on Bond Retirement		115
5	January 01, 2023	Cash	643,680
		Discount on Bonds Payable		19,320
		Bonds Payable		660,000