On 2/1/16, you issue a 10-year $100,000 bond paying interest quarterly from the date of issue. The market rate of interest has increased to 6% and the stated rate is 5%.
On July 31, you decide to retire the bond you issued on 2/1/2016 because interest rates have fallen. The bond price is 116.479. You retire the bond using 1) the proceeds of a 4%, 10-year, $100,000 bond paying interest quarterly issued on July 31 and 2) cash. The market rate of interest on July 31 is 3%. Record all transactions related to the bonds on July 31. The new bond issue has associated costs of $1,000.
Prepare the necessary journal entry/entries for July 31, 2016