On January 1, 2007, Cardinal Corporation Issued 5% 25-Year Bonds

question 39

Multiple Choice

On January 1, 2007, Cardinal Corporation issued 5% 25-year bonds at par and used the $12,000,000 proceeds to finance the construction of a new plant. On January 1, 2017, the company acquired the bonds on the open market for $11,500,000. Assuming that Cardinal Corporation is neither bankrupt nor insolvent, the acquisition and retirement of the bonds results in which of the following:

• A)The company must recognize a $500,000 gain.
• B)The company can make an election to recognize a $500,000 gain or reduce the company's basis in the plant by $500,000.
• C)The company must recognize a $500,000 gain and increase the company's basis in the plant by $500,000.
• D)The company can amortize the $500,000 gain, recognizing income over the remaining life of the bonds.
• E)None of these.

---

Definitions:

Activity Metrics

Quantitative measures used to assess the performance or success of specific actions or engagements in various contexts, such as website analytics.

Financial Outcomes

The results or consequences of financial activities, including profits, losses, return on investment, and changes in financial position.

Brand Success

The achievement of a brand in fulfilling its goals, such as gaining recognition, customer loyalty, and financial growth.

Residual Data

Residual data refers to remnants of data that remain on storage media after deletion or formatting, which can sometimes be recovered.