This video explains how to account for the early retirement of bonds (aka early extinguishment of debt or early redemption of bonds).

When a company retires (redeems) its bonds prior to the maturity date, the company must do several things:
-Reduce the cash account by the amount used to repurchase the bonds (if cash is used to retire the bonds)
-Remove the bonds payable
-Zero out the unamortized discount or unamortized premium
-Record a gain or loss IF the repurchase price is different from the carrying value (aka book value) of the bonds on the date the bonds are retired

There are two ways to calculate the gain or loss on the early retirement of the bonds:
(1) record the journal entry; if a debit is required to make the journal entry balance, then debit a loss on early retirement (or loss on bond redemption, loss on early extinguishment of debt, etc.). If a credit is instead required to make the journal entry balance, the credit a gain on early retirement (or gain on bond redemption, gain on early extinguishment of debt, etc.)

(2) calculate the difference between the repurchase price (the amount paid to retire the bonds) and carrying value (aka book value) of the bonds at the time they are retired. If the repurchase price is less than the carrying value, there is a gain. If the repurchase price is greater than the carrying value, there is a loss.

0:00 Introduction
0:39 4 things to do when retiring bonds
1:20 Example
3:59 T-account for discount on bonds payable
4:18 Journal entry to record gain on retirement of bonds
5:53 Alternative situation (loss on retirement of bonds)
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