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The long-term liability section of Eastern Post Corporation’s balance sheet as o

ID: 2427926 • Letter: T

Question

The long-term liability section of Eastern Post Corporation’s balance sheet as of December 31, 2015, included 8% bonds having a face amount of $46.8 million and a remaining premium of $7.7 million. On January 1, 2016, 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 104 (104% of face amount Eastern Post repurchased $11.7 million of the bonds on the open market at their market price of $12.2 million

Explanation / Answer

Remaining premium related $11.7 million of the bonds=$7.7*$11.7/$46.8=1.925 million

   Amount in million $

Account Description debit credit Bonds payable 11.7 Premium on bonds 1.925 Cash 12.2 Gain on retirement of bonds 1.425 13.625 13.625