Asked by Cynthia Powell on Jul 26, 2024
Verified
In 2010, Tame Co.took advantage of market conditions to refund its outstanding debt.Wild should report the excess of the carrying amount of the old debt over the amount paid to extinguish it as a(n)
A) deferred credit to be amortized over life of new debt
B) part of continuing operations
C) extraordinary item, net of income taxes
D) prior period adjustment
Outstanding Debt
The total amount of borrowed money a company or individual has yet to repay to creditors.
Continuing Operations
Parts of a business expected to continue operating and contributing to revenue over the long term, as opposed to discontinued operations.
Carrying Amount
The net value of an asset or liability on a company's balance sheet, determined by subtracting its accumulated depreciation or amortization from its original cost.
- Acquire knowledge on the accounting approach for bond retirement prior to maturity and the identification of substantial gains or losses.
Verified Answer
DR
Dhaivat RavalJul 27, 2024
Final Answer :
B
Explanation :
When a company refunds its debt it is considered a part of the normal course of business and not a rare or infrequent event. Therefore, the excess amount paid for the old debt should be reported as part of continuing operations. Unlike extraordinary items, this amount would not be reported net of taxes or as a prior period adjustment. It is also not a deferred credit as it does not represent future obligations or benefits.
Learning Objectives
- Acquire knowledge on the accounting approach for bond retirement prior to maturity and the identification of substantial gains or losses.