Elmira, Inc. had $20,000,000 of callable bonds outstanding on December 31, 2018. The ten-year bonds were issued on January 1, 2012 for $21,000,000. Elmira can call the bonds at 102 anytime after January 1, 2018. At the end of 2018, the Premium on Bonds Payable account had a credit balance of $346,000. Acme decides to call the bonds on January 2, 2019.
Required:
1. Compute the gain or loss on early extinguishment of debt.
2. Prepare the journal entry to record the debt extinguishment.

Question

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The Answer of Elmira, Inc. had $20,000,000 of callable bonds outstanding on December 31, 2018. The ten-year bonds were issued on January 1, 2012 for $21,000,000. Elmira can call the bonds at 102 anytime after January 1, 2018. At the end of 2018, the Premium on Bonds Payable account had a credit balance of $346,000. Acme decides to call the bonds on January 2, 2019.
Required:
1. Compute the gain or loss on early extinguishment of debt.
2. Prepare the journal entry to record the debt extinguishment.