Petoskey Co. sold $800,000, 9%, 10 year bonds on January 1, 2012. The bonds were dated January 1, and interest is paid on January 1 and July 1. The bonds were sold at 105.
(a) Prepare the journal entry to record the issuance of the bonds on January 1, 2012.
(b) At December 31, 2012, the balance in the Premium on Bonds Payable account is $36,000. Show the balance sheet presentation of accrued interest and the bond liability at December 31, 2012.
(c) On January 1, 2014, when the carrying value of the bonds was $832,000, the company redeemed the bonds at 105. Record the redemption of the bonds assuming that interest for the period has already been paid.