If There Is a Loss on Bonds Redeemed Before Maturity

question 96

Multiple Choice

If there is a loss on bonds redeemed before maturity, it is

• A) debited directly to Retained Earnings.
• B) reported as "Other Expenses" on the income statement.
• C) reported as a reduction in interest revenue on the income statement.
• D) debited to Interest Expense, as a cost of financing.

---

Definitions:

Minimum Required Rate

The lowest return rate that an investor or project manager would accept for an investment.

Residual Income

Income that remains after all costs and expenses, including minimum required return on investment, have been subtracted.

Operating Assets

Long-term assets used in the operations of a business, including property, plant, and equipment, that generate income.

Net Operating Income

The profit generated from a company’s everyday business operations, calculated by subtracting operating expenses from revenue.