A Material Gain Earned When Retiring Bonds Before Their Maturity

question 25

Multiple Choice

A material gain earned when retiring bonds before their maturity date is recognized by

• A)amortizing it over the remaining life of the bond
• B)making a prior period adjustment
• C)reporting it as an extraordinary item in the year of retirement
• D)reporting it as an ordinary item in the year of retirement

---

Definitions:

Budgeting

The process of creating a plan to spend your money, outlining future financial goals and how resources will be allocated to achieve them.

Differential Costs

The difference in total cost that will result from selecting one alternative over another.

Variable

A quantity or element that is subject to change, often used in mathematical equations or experiments to represent changeable factors.

Contribution Format

A type of income statement where costs are segregated into variable and fixed categories, emphasizing cost behavior and contribution margin.