Question

The long-term liability section of Eastern Post Corporation's balance sheet as of December 31, 2020, included 11% bonds having a face amount of $40.4 million and a remaining premium of $6.1 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 103 (103% of face amount). 2. Eastern Post repurchased $10.1 million of the bonds on the open market at their market price of $10.6 million. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Record the entry for redemption of the bonds assuming Eastern Post called half the bonds at the call price of 103 (103% 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.) View transaction list Journal entry worksheet Record the redemption of the bonds. Note: Enter debits before credits. General Journal Debit Credit Date January 01, 2021

Answer 1

Required 1
Date	General journal	Debit	Credit
January 01,2021	Bonds payable	$ 20.200 M
	Premium on bonds payable ($23.250 -$20.200)	$ 3.050 M
	Cash		$20.806 M
	Gain on redemption of bonds		$ 2.444 M
	( To record redemption of the bonds )

Note 1:
Particulars	Amount($)
Carrying amount of bonds at December 31,2020 {($ 40.4 M +$6.1 M)/2}	$ 23.250 M
( Half of the bonds )
less: Selling price of bonds (Half of the bonds )	($ 20.806 M)
{($40.4 M /2 )= $ 20.20 M , $ 20.20 M * 103 % }
Gain on redemption of bonds	$ 2.444 M

Required 2
Date	General journal	Debit	Credit
January 01,2021	Bonds payable	$ 10.100 M
	Premium on bonds payable ($11.625 -$ 10.100)	$ 1.525   M
	Cash		$ 10.600 M
	Gain on redemption of bonds		$ 1.025 M
	( To record redemption of the bonds )

Note 2:
Eastern post repurchased $ 10.1 M out of $ 40.40 M . Hence , to use 25% of
amount given
Particulars	Amount($)
Carrying amount of bonds at December 31,2020 {($ 40.4M +$6.1 M)*25%}	$ 11.625 M
less: Market price of bonds (Given )	($ 10.600 M)
Gain on redemption of bonds	$ 1.025 M