On January 1, 2009, Tiny Tim Industries Had Outstanding $1,000,000

question 11

Multiple Choice

On January 1, 2009, Tiny Tim Industries had outstanding $1,000,000 of 12% bonds with a carrying amount of $966,130. The indenture specified a call price of $981,000. The bonds were issued previously at a price to yield 14%. Tiny Tim called the bonds (retired them) on July 1, 2009. What is the amount of the loss on early extinguishment?

• A)$0.
• B)$6,932.
• C)$7,241.
• D)$7,629.

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Definitions:

Recording Purchases

The process of documenting transactions related to acquiring goods or services, essential for accurate financial reporting and inventory management.

Cash Discounts

These are deductions allowed by sellers on invoice amounts if the buyer pays promptly within a specified period, serving as an incentive for early payment.

Perpetual Inventory System

An inventory management method where records are continuously updated to reflect buys, sells, and stock levels in real-time.

Gross Method

An accounting practice where discounts for early payment are not considered until they are actually taken by the purchaser.