Based on the information provided, Sunland Company should report the reacquisition of the bonds as an extinguishment or retirement of debt.
When a company repurchases its own bonds before their maturity date, it is considered an extinguishment of debt. In this case, Sunland repurchased $4,020,000 worth of bonds at 96% of their face value, which indicates a discount from the face value of the bonds.
To properly report the reacquisition, Sunland should record the following:
1. Retirement of Bonds Payable: Debit the Bonds Payable account by the face value of the bonds repurchased, which is $4,020,000.
2. Gain on Extinguishment of Debt: Credit the Gain on Extinguishment of Debt account for the difference between the carrying amount of the bonds ($4,020,000 * 96%) and their recorded value on the books.
3. Cash: Credit the Cash account for the amount paid to repurchase the bonds, which is $4,020,000.
It's important to note that the gain or loss on extinguishment of debt should be reported separately on the income statement, typically as a non-operating item. Additionally, the amortization of the bond premium and interest expense should also be recorded, as mentioned in the provided information.