Early Extinguishment of Debt On December 31, 2003, Sunnyside Cruises issued $20 million of 10-year, 12% debentures.

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Early Extinguishment of Debt On December 31, 2003, Sunnyside Cruises issued $20 million of 10-year, 12% debentures. The mar- ket interest rate at issuance was 14%. On December 31, 2004 (after all interest payments and amorti- zation had been recorded for 2004), the company purchased all the debentures for $19 million. Throughout their life, the debentures had been held by a large insurance company. Show all amounts in thousands of dollars. Round to the nearest thousand. 1. Compute the gain or loss on early extinguishment. 2. By using the balance sheet equation, present an analysis of the December 31, 2004, transaction on the issuer's books. 3. Show the appropriate journal entry. 4. At what price on December 31, 2004 could Sunnyside Cruises redeem the bonds and realize a $500,000 gain?

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