Step-by-step explanation:
Carrying amount of the bonds at January 1, 2018 = $42.4 million + $6.6 million = $49m, so half of that is $24.5m. Selling price was at 104, so proceeds from the sale = $21.2m x 104% = $22m, so there's a gain of $24.5m - $22m or $2.5m
Dr Bonds payable $21.2m
Dr Premium on bonds payable $3m
Cr Cash $22m
Cr Gain on redemption of bonds $2.5m
2. Eastern Post repurchased $11.7 million of the bonds on the open market at their market price of $12.2 million
We are repurchasing $11.7 m out of $42.4m here, so remember to use only 25% of the amounts given to you in the question.
Dr Bonds payable $11.7m
Dr Premium on bonds payable $1.5m
Cr Cash $12.2 m
Cr Gain on redemption of bonds $1m