Premium Amortization Schedule with Retirement Before Maturity
Response to the following problem:
The Dorsett Corporation issued $600,000 of 13% bonds on January 1, 2009 for $614,752.24. The bonds are due December 31, 2011, were issued to yield 12%, and pay interest semiannually on June 30 and December 31. The company uses the effective interest method.
Required:
1. Prepare a bond interest expense and premium amortization schedule.
2. Assume the company retired the bonds on September 30, 2011 for $630,000, which includes accrued interest. Prepare the journal entry to record the bond retirement.