Bond Retirement (Bond Refunding, Replacing Current Bond Issue With New Bond Issue)

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Accounting for a bond refunding where an existing bond issued is called and retired and replaced with a new bond, the funds received from the new bond issued are used to pay for the retirement of the existing bond, reacquisition price is the amount paid to extingish the debt, any excess of the net carrying value amount over the reacquisition price is a gain from extinguishment, the excess of the acquistion price over the net carrying amount is a loss from extinguishment, the unamortized premium or discount, and any costs of issue applicable to the bonds must be amortized up to the reaquisition date, the example detailed is Corp-A issued $3 mil of 10%, 10-year bonds on (1/1/2010), at 97 (97% of par or face value), interest is payable semi-annually on (1/1) and (7/1), Legal & other costs incurred of $50,000, the bonds are callable at 101 (101% of face amt.) and on (1/1/2015), Corp-A called the bonds & retired them using the proceeds from a new bond issued $4 mil of 8%, 10-year bonds on (1/1/2015) at 102 (102% of par value), detailed accounting by Allen Mursau

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