Swifty Company issued its $7\%,25-$year mortgage bonds in the principal amount of $$3,230,000$ on January $2,2011,$ at a discount of $$135,000,$ which it proceeded to amortize by charges to expense over the life of the issue on a straight$-$line basis. The indenture securing the issue provides that the bonds could be called for redemption in total but not in part at any time before maturity at $105\%$ of the principal amount, but it did not provide for any sinking fund.

On December $18,2025,$ the company issued its $11\%,20-$year debenture bonds in the principal amount of $$4,180,000$ at $103,$ and the proceeds were used to redeem the $7\%,25-$year mortgage bonds on January $2,2026.$ The indenture securing the new issue did not provide for any sinking fund or for redemption before maturity.

a$.$ Prepare journal entries to record the issuance of the $11\%$ bonds and the redemption of the $7\%$ bonds. $($Record entries in the order displayed in the problem statement. If no entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.$)$

Account Titles and Explanation

Cash

Bonds Payable

Premium on Bonds Payable

Bonds Payable

Loss on Redemption of Bonds

Discount on Bonds Payable

b$1.$ Indicate the income statement treatment of the gain or loss from redemption.

The is reported as

Debit

Credit