Palmer, Inc., sold its 9% bonds with a maturity value of $2,000,000 on 10/1/16 to yield 10%. The bond issue date is 8/1/16, and the bonds reach maturity on 8/1/21. Interest on the bonds is payable semiannually on 2/1 and 8/1. The bonds are callable at 102 any time after 8/1/18. By 11/1/18, the market rate of interest has declined and the market price of Palmer’s bonds has risen to a price of 101. Palmer’s opportunities have changed such that the firm decides to retire its 9% bonds. Palmer is able to reacquire $1,000,000 worth of bonds on the open market at 101 (plus accrued interest) on 11/1/18. The remaining $1,000,000 of the bonds is reacquired by exercising the bonds’ call feature on 11/1/18.
Required:
a) Prepare the complete amortization table.
b) Prepare all of the journal entries required in 2016 and 2017 for these bonds.
c) Prepare the journal entries required to record the bond retirement.
d) What was the total gain or loss experienced by Palmer in reacquiring the bonds?