he balance sheet of Indian River Electronics Corporation as of December 31, 2020, included 13% bonds having a face amount of $92.0 million. The bonds had been issued in 2013 and had a remaining discount of $5.0 million at December 31, 2020. On January 1, 2021, Indian River Electronics called the bonds before their scheduled maturity at the call price of 103. Required:Prepare the journal entry by Indian River Electronics to record the redemption of the bonds at January 1, 2021.

Dr Bonds Payable 92,000,000

Dr Loss on early existing 7,760,000

Cr Discount on Bonds Payable 5,000,000

Cr Cash 94,760,000

Explanation:

Preparation of the journal entry by Indian River Electronics to record the redemption of the bonds at January 1, 2021

Based on the information given the journal entry by Indian River Electronics to record the redemption of the bonds at January 1, 2021 will be :

Dr Bonds Payable 92,000,000

Dr Loss on early existing 7,760,000

Cr Discount on Bonds Payable 5,000,000

Cr Cash 94,760,000

(103%*92m)

Calculation for Loss on early existing

Loss on early existing=[(94,760,000 + 5,000,000)- 92,000,000]

Loss on early existing= 99,760,000- 92,000,000

Loss on early existing=7,760,000

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