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Prepare the journal entry to record the retirement of bonds

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Question - On February 01, 2020, Mon Inc. issued $800,000 of 9%, 5 year bonds at a premium.

The bonds are retired prior to maturity at 104. The book value of the bonds is $848,917 at this time.

Mon Inc. amortizes bond discounts/premiums using the effective-interest method.

a) Was the contract rate on the bonds at the time of issuance greater or lower than the market rate of interest? Greater or Lower only.

b) Prepare the journal entry to record the retirement of the bonds.

c) Assume that the bonds were redeemed at maturity. Would the total cash interest paid be different if the company used the straight-line method of amortization of premiums? Yes or No only.

Reference no: EM133176523

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