Prepare journal entries to record the following retirement. (Show computations and round to the nearest dollar.) The December 31, 2014 balance sheet of Wolfe Co. included the following items: 7.5% bonds payable due December 31, 2022 $2,000,000 Unamortized discount on bonds payable 80,000 The bonds were issued on December 31, 2012 at 95, with interest payable on June 30 and December 31. (Use straight-line amortization.) On April 1, 2015, Wolfe retired $400,000 of these bonds at 101 plus accrued interest. I know the solution however, how do you get "1/8" in the solution when calculating discount on bonds payable?

Solution 14-121

Interest Expense................................................................................ 8,000

Cash ($400,000 7.5% 3/12)............................................. 7,500

Discount on Bonds Payable ($80,000 1/5 1/8 3/12)..... 500

Bonds Payable................................................................................... 400,000

Loss on Redemption of Bonds........................................................... 19,500

Discount on Bonds Payable [(1/5 $80,000) $500]........... 15,500

Cash....................................................................................... 404,000