On Its December 31, 2010 Statement of Financial Position, Emig

question 75

Multiple Choice

On its December 31, 2010 statement of financial position, Emig Corp.reported bonds payable of $5,680,000.The bonds had a $6,000,000 face value.On January 2, 2011, Emig retired $3,000,000 of the outstanding bonds at par plus a call premium of $70,000.What amount should Emig report in its 2011 income statement as loss on extinguishment of debt (ignore taxes) ?

• A)$0
• B)$70,000
• C)$160,000
• D)$230,000

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Definitions:

Cash Flows

The total amount of money being transferred into and out of a business, often analyzed to assess the financial health of an organization.

Annual Return

The percentage of profit or loss on an investment over a one-year period.

Payback Period

The duration of time it takes to recoup the initial investment cost of a project or investment, through cash inflows or savings.

Net Cash Flows

A rephrasing of Net Cash Flow, it represents the net change in a company's cash and cash equivalents by subtracting cash outflows from cash inflows within a financial period.