On January 1, 2018, White Water issues $570,000 of 7% bonds, due in 10 years, wi
ID: 2573316 • Letter: O
Question
On January 1, 2018, White Water issues $570,000 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 $612,401. .
Using an amortization schedule, show that the bonds have a carrying value of $602,195 on December 31, 2020.
If the market interest rate increases to 8% on December 31, 2020, it will cost $539,895 to retire the bonds. Record the retirement of the bonds on December 31, 2020.
Explanation / Answer
Dec-31-20 Bonds payable 570000 Premium on Bonds payable 32195 Cash 539895 Gain on redemption of bonds 62300