On January 1,2009,Riley Corp

question 74

Multiple Choice

On January 1,2009,Riley Corp.acquired some of the outstanding bonds of one of its subsidiaries.The bonds had a carrying value of $421,620,and Riley paid $401,937 for them.How should you account for the difference between the carrying value and the purchase price in the consolidated financial statements for 2009?

• A)The difference is added to the carrying value of the debt.
• B)The difference is deducted from the carrying value of the debt.
• C)The difference is treated as a loss from the extinguishment of the debt.
• D)The difference is treated as a gain from the extinguishment of the debt.
• E)The difference does not influence the consolidated financial statements.

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Definitions:

Marginal Cost

The cost added by producing one extra item of a product.

Purely Competitive

Another term for pure competition, it refers to a theoretical market structure with a large number of buyers and sellers, homogeneous products, and free entry and exit from the market.

Output Level

The total amount of goods or services produced by a business or economy within a specific period.

Economic Loss

A situation where total cost exceeds total revenue, resulting in a negative profit for a business.