Clabber Company Has Bonds Outstanding with a Par Value of $100,000

question 88

Multiple Choice

Clabber Company has bonds outstanding with a par value of $100,000 and a carrying value of $97,300. If the company calls these bonds at a price of $95,000, the gain or loss on retirement is:

• A) $2,700 loss.
• B) $2,300 loss.
• C) $2,300 gain.
• D) $5,000 loss.
• E) $2,700 gain.

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Definitions:

Perfectly Competitive

A market structure characterized by many buyers and sellers, all of whom are price takers with the product being homogeneous.

Sunk Costs

Expenses that have already been incurred and cannot be recovered, which should not influence future business decisions.

Dairy Farmer

A dairy farmer is an individual engaged in the management and care of cows for the production of milk and other dairy products.

Accounting Profits

The difference between total revenue and explicit costs of a business, calculated according to standard accounting practices.