bonds of Kirby, Inc. (Show computations.)

(a) On June 1, 2009, Kirby, Inc. issued $600,000, 6% bonds for $587,640, which includes accrued interest. Interest is payable semiannually on February 1 and August 1 with the bonds maturing on February 1, 2019. The bonds are callable at 102.

(b) On August 1, 2009, Kirby paid interest on the bonds and recorded amortization. Kirby uses straight-line amortization.

(c) On February 1, 2011, Kirby paid interest and recorded amortization on all of the bonds, and purchased $360,000 of the bonds at the call price. Assume that a reversing entry was made on January 1, 2011.

Solution 14-129

(a) Cash................................................................................................. 587,640

Discount on Bonds Payable................................................................ 24,360

Bonds Payable....................................................................... 600,000

Interest Expense ($600,000 × 6% × 4/12).................................. 12,000

(b) Interest Expense ($600,000 × 6% × 6/12) + $420................................... 18,420

Cash....................................................................................... 18,000

Discount on Bonds Payable ($24,360 × 2/116).......................... 420

(c) Interest Expense ($18,000 + $1,260).................................................... 19,260

Cash....................................................................................... 18,000

Discount on Bonds Payable ($24,360 × 6/116)......................... 1,260

Bonds Payable................................................................................... 360,000

Loss on Bond Redemption.................................................................. 19,296

Discount on Bonds Payable [.6 × ($24,360 – $4,200)] ............... 12,096

Cash....................................................................................... 367,200

I understand everything except the 116 fractions. where are they getting this answer from???