(Early retirement of bonds, LO 4) In fiscal 2008 Ruthilda Inc. (Ruthilda) decided to exercise its option to redeem its outstanding bond issue before the bonds matured in 2015. The bonds had a face value of $3,000,000 and Ruthilda paid

$3,200,000 to redeem them. The bonds were originally issued at a premium of

$130,000, and at the time the bonds were redeemed $60,000 of the premium had been amortized.

Required:

a. Prepare the journal entry to record the early retirement of the bonds.

b. What would be the entry if Ruthilda were able to redeem the bonds on the open market at a cost of $2,800,000?

c. What is the economic significance of a gain or loss on the redemption of bonds? How do you think the gain or loss should be reported in the financial statements? Explain. In responding, consider the information needs of users of the financial statements.