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The balance sheet of Indian River Electronics Corporation as of December 31, 2017, included 12.75% bonds having a face amount of $91.9 million. The bonds had been issued in 2010 and had a remaining discount of $4.9 million at December 31, 2017. On January 1, 2018, Indian River Electronics called the bonds before their scheduled maturity at the call price of 102.

Required:
Prepare the journal entry by Indian River Electronics to record the redemption of the bonds at January 1, 2018. (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.)

Solution

Journal entry

Particulars

Debit

Credit

Bonds payable (face value amount)

     91,900,000

Loss on early extinguishment (balance figure)

       6,738,000

Discount on bonds

                            4,900,000

Cash ($91,900,000 × 102%) redemption

                          93,738,000