A Bond with a $500,000 Maturity Value Is Immediately Retired

question 46

Multiple Choice

A bond with a $500,000 maturity value is immediately retired for $515,000 plus accrued interest.The premium on bonds payable (bond premium) at the retirement date is $17,500.Which of the following statements is correct?

• A)The loss on the debt extinguishment is $32,500.
• B)The gain on the debt extinguishment is $2,500.
• C)The gain on the debt extinguishment is $32,500.
• D)The gain or loss on the debt extinguishment can't be determined without knowing the dollar amount of the accrued interest.

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