Answer:
Loss on the early extinguishment of the bonds = $4,800,000
Explanation:
Early extinguishment of the bonds occurs when the bonds issuer recalls the bonds before the maturity date. This usually happens when the market rate of the bonds falls below the rate being paid by the issuer.
Cash paid on the bonds = Face value x 102%
Cash paid on the bonds = $90,000,000 x 102%
Cash paid on the bonds = $91,800,000
Gain or loss on the early extinguishment of the bonds = Cash paid + Discounts on bonds payable - Bonds payable
Loss on the early extinguishment of the bonds = $91,800,000 + $3,000,000 - $90,000,000
Therefore, the loss on the early extinguishment of the bonds = $4,800,000
