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The long-term liability section of Twin Digital Corporation’s balance sheet as of December 31, 2017, included...

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Accounting

The long-term liability section of Twin Digital Corporation’sbalance sheet as of December 31, 2017, included 10% bonds having aface amount of $50 million and a remaining discount of $1 million.Disclosure notes indicate the bonds were issued to yield 12%.Interest expense is recorded at the effective interest rate andpaid on January 1 and July 1 of each year. On July 1, 2018, TwinDigital retired the bonds at 103 ($51.5 million) before theirscheduled maturity. Required: 1. & 2. Prepare the necessaryjournal entries for Twin Digital on July 1, 2018. (If no entry isrequired for a transaction/event, select "No journal entryrequired" in the first account field. Enter your answers in wholedollar.)

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Part 1: Prepare the journal entry by Twin Digital to record the semiannual interest on July 1, 2018.
General Journal Debit   Credit
Interest Expense (12%*49,000,000*6/12) $              2,940,000
      Discount on Bonds Payable                             $             440,000
      Cash (10%*50000000*6/12) $          2,500,000
Part 2: Prepare the journal entry by Twin Digital to record the redemption of the bonds on July 1, 2018
General Journal Debit   Credit
Bonds Payable $            50,000,000
Loss on early extinguishment $              2,060,000
        Discount on Bonds Payable (1,000,000 – 440,000) $             560,000
        Cash (50,000,000 x 103%) $         51,500,000

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