Prepare the journal entries needed in an Enterprise Fund to record the following transactions. Include any adjusting entries required.
1. Issued refunding bonds at par, $8,000,000. The bonds bear interest at 8% payable annually and mature in 5 years. (Ignore bond issue costs.)
2. Paid the $8,000,000 into an irrevocable trust to defease in substance the previously outstanding bonds payable of the Enterprise Fund. These old bonds have a par value of $7,200,000 and an unamortized discount of $100,000. The old bonds are scheduled to mature in six years.
3. The annual interest payment on the new bonds was made at year end when due.