Accounting for Bonds Issued at a Discount
Response to the following problem:
Kontiki Alarm Company issued $250,000 of 10%, five-year bonds at 98 on June 30, 2009. Interest is payable on June 30 and December 31. The company uses the straight-line method to amortize bond premiums and discounts. The company's fiscal year is from February 1 through January 31.
Prepare all necessary journal entries to account for the bonds from the date of issuance through June 30, 2010. Also record the retirement of the bonds on June 30, 2014, assuming that all interest has been paid and that the discount has been fully amortized.