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On January 1, 2021, White Water issues $540,000 of 7% bonds, due in 10 years, with...

On January 1, 2021, White Water issues $540,000 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 $580,169. If the market interest rate increases to 8% on December 31, 2023, it will cost $511,480 to retire the bonds. Record the retirement of the bonds on December 31, 2023.

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Answer #1
Amortization Schedule
Date Cash Paid Interest Expense Premium Amortized Bond Carrying Value
Jan. 1, 2021 580169
Jun. 30, 2021 18900 17405 1495 578674
Dec. 31, 2021 18900 17360 1540 577134
Jun. 30, 2022 18900 17314 1586 575548
Dec. 31, 2022 18900 17266 1634 573915
Jun. 30, 2023 18900 17217 1683 572232
Dec. 31, 2023 18900 17167 1733 570499

Cash paid = 7% x $540000 x 6/12 = $18900

Date Account Titles and Explanation Debit Credit
December 31, 2023 Bonds payable 540000
Premium on bonds payable 30499
Gain on redemption of bonds 59019
Cash 511480
(To record the retirement of bonds)
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