Problem:
On January 1, 2015, White Water issues $600,000 of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. The market interest rate on the issue date is 6% and the bonds issued at $644,632.
Required:
Using an amortization schedule, show that the bonds have a carrying value of $633,887 on December 31, 2017.
Question: If the market interest rate increases to 8% on December 31, 2017, it will cost $568,311 to retire the bonds. Record the retirement of the bonds on December 31, 2017.
Note: Please show how you came up with the solution.