Which of the Following Statements Is True with Regard to Early

question 139

Multiple Choice

Which of the following statements is true with regard to early retirement of bonds?

• A)If the carrying value of the bonds is higher than the redemption price,the issuing firm must record a loss.
• B)Firms always find it advantageous to retire bonds issued at lower rates with bonds issued at higher rates.
• C)It is always advantageous to carry out early retirement for bonds issued at a premium but not for bonds issued at a discount.
• D)Any gain or loss resulting from early retirement of bonds would appear on the income statement of the issuing company.

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Definitions:

Deferred Tax Asset

A deferred tax asset is an accounting term used to describe a situation where a business has paid more taxes or anticipates paying more taxes than it is currently liable for.

Income Tax Liability

The total amount of income tax that an individual or corporation owes to tax authorities.

Income Tax Expense

Income tax expense is the amount of expense that a business recognizes in a given accounting period for the taxes associated with its taxable income.

Journal Entry

A record of a financial transaction in the accounting books of a business or organization.