Asked by Samantha De Liguori on May 09, 2024
Verified
When a company retires bonds before maturity the gain or loss on redemption is the difference between the cash paid and the
A) carrying value of the bonds.
B) face value of the bonds.
C) original selling price of the bonds.
D) maturity value of the bonds.
Redemption
The process of paying off or buying back securities or debts by the issuer before their maturity date, often at a predetermined price.
Carrying Value
The book value of an asset, reflecting its original cost minus any depreciation, amortization, or impairment charges.
Bonds Maturity
The date at which a bond's principal amount is due to be paid back to the bondholder, terminating the bond's existence.
- Understand the concepts related to the issuance and redemption of bonds before maturity.
Verified Answer
LS
Ledjine SadiraMay 16, 2024
Final Answer :
A
Explanation :
The carrying value of the bonds is the amount at which the bonds are recorded on the balance sheet, which includes any unamortized premiums or discounts on the bonds. When the company retires the bonds, the gain or loss on redemption is calculated as the difference between the cash paid and the carrying value of the bonds.
Explanation :
The carrying value of the bonds represents the amount of the bond's principal that has been amortized and is currently outstanding. When a company retires bonds before maturity, they must pay the carrying value of the bonds plus any applicable call premium. The gain or loss on redemption is the difference between the cash paid and the carrying value of the bonds.
Learning Objectives
- Understand the concepts related to the issuance and redemption of bonds before maturity.