Question

The long-term liability section of Eastern Post Corporation's balance sheet as of December 31, 2020, included 10% bonds having a face amount of $40 million and a remaining premium of $6 million. On January 1, 2021, Eastern Post retired some of the bonds before their scheduled maturity. Required: Prepare the journal entry by Eastern Post to record the redemption of the bonds under each of the independent circumstances below: 1. Eastern Post called half the bonds at the call price of 102 (102% of face amount). 2. Eastern Post repurchased $10 million of the bonds on the open market at their market price of $10.5 million. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Record the entry for redemption of the bonds assuming Eastem Post called half the bonds at the call price of 102 (102% of face amount). (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Enter your answers in whole dollars.) Date General Journal Debet Credit 1 January 01, 2021 Bonds payable Loss on early extinguishment Cash 20,000,000 400,000 20.400 000

Answer 1

Solution 1:

Journal Entries - Eastern Post Corporation
Date	Particulars	Debit	Credit
1-Jan-21	Bond payable Dr	$20,000,000.00
	Premium on bond payable Dr	$3,000,000.00
	To Cash		$20,400,000.00
	To Gain on early extinguishment		$2,600,000.00
	(To record early retirement of bond)

Solution 2:

Journal Entries - Eastern Post Corporation
Date	Particulars	Debit	Credit
1-Jan-21	Bond payable Dr	$10,000,000.00
	Premium on bond payable Dr	$1,500,000.00
	To Cash		$10,500,000.00
	To Gain on early extinguishment		$1,000,000.00
	(To record early retirement of bond by repurchase of bonds)