The Lewis Company sells $200,000 of 13% bonds dated January 1, 2006, on that date, for $204,650.74 to yield 12%. The bonds pay interest annually on December 31, and bonds of $40,000 mature on each December 31 for the next 5 years. The company uses the effective interest method of amortization.

Required

1. Prepare a serial bond premium amortization schedule for these bonds.

2. Prepare the journal entries necessary to record the yearly interest payments, premium amortization, and serial bond redemption.