When Bonds Are Retired Prior to Their Maturity Date

question 1

Multiple Choice

When bonds are retired prior to their maturity date:

• A) GAAP has been violated.
• B) The issuing company probably will report an ordinary gain or loss.
• C) The issuing company probably will report a gain.
• D) The issuing company will report a non-operating gain or loss.

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Definitions:

Accounting Period

A specific time period for which financial information is reported, often a quarter or a year.

Supplies Expense

Supplies expense refers to the cost associated with items consumed or used up in the operation of a business, which are not directly part of the manufactured product.

Income Statement

A financial document that summarizes a company's revenues, expenses, and profits or losses over a specific period.

Prepaid Expense

Expenses paid in advance for goods or services to be received in the future, recorded as an asset on the balance sheet until they are incurred.