Premium Amortization and Partial Retirement
Response to the following problem:
Rockwood Company issued $100,000 of 10% bonds on November 1, 2010, at 103. Interest on the bonds is payable on November 1 and May 1 of each year, and the maturity date is November 1, 2020. Rockwood Company retired bonds with a face value of $20,000 on February 1, 2012, at 98 plus accrued interest. The company uses straight-line amortization and reverses any calendar year-end adjusting entries.
Required :
1. Prepare the journal entry to record the issuance of the bonds on November 1, 2010.
2. Prepare all the journal entries to record the interest expense during 2011.
3. Prepare the journal entries to record the retirement of $20,000 of the bonds on February 1, 2012.