Discount Amortization Schedule and Retirement Before Maturity
Response to the following problem:
Donaldson Incorporated sold $500,000 of 12% bonds on January 1, 2009, for $470,143.47, a price that yields a 14% interest rate. The bonds pay interest semiannually on June 30 and December 31 and are due December 31, 2012. The company uses the effective interest method.
Required
1. Prepare an interest expense and discount amortization schedule.
2. Assume the company reacquired the bonds on July 1, 2011 at 104. Prepare journal entries to record the bond retirement.