Question 1

X2 issued callable bonds on January 1,2018.The bonds pay interest annually on December 31 each year.X2's accountant has projected the following amortization schedule from issuance until maturity: X2 buys back the bonds for $103,000 immediately after the interest payment on 12/31/2019 and retires them.What gain or loss,if any,would X2 record on this date?
  Date  Cash  Paid  Interest  Expense  Decrease  in Carrying  Value  Carrying  Value 1/1/2018$104,21212/31/2018$7,000$6,253$747103,46512/31/20197,0006,208792102,67312/31/20207,0006,160840101,83312/31/20217,0006,110890100,94312/31/20227,0006,057943100,000\begin{array} { | c | r | r | r | r | } \hline 	ext { Date } & \begin{array} { r } 	ext { Cash } \	ext { Paid }\end{array} & \begin{array} { r } 	ext { Interest } \	ext { Expense }\end{array} & \begin{array} { r } 	ext { Decrease } \	ext { in Carrying } \	ext { Value }\end{array} & \begin{array} { r } 	ext { Carrying } \	ext { Value }\end{array} \\hline 1 / 1 / 2018 & & & & \$ 104,212 \\hline 12 / 31 / 2018 & \$ 7,000 & \$ 6,253 & \$ 747 & 103,465 \\hline 12 / 31 / 2019 & 7,000 & 6,208 & 792 & 102,673 \\hline 12 / 31 / 2020 & 7,000 & 6,160 & 840 & 101,833 \\hline 12 / 31 / 2021 & 7,000 & 6,110 & 890 & 100,943 \\hline 12 / 31 / 2022 & 7,000 & 6,057 & 943 & 100,000 \\hline\end{array} Date 1/1/201812/31/201812/31/201912/31/202012/31/202112/31/2022​ Cash  Paid ​$7,0007,0007,0007,0007,000​ Interest  Expense ​$6,2536,2086,1606,1106,057​ Decrease  in Carrying  Value ​$747792840890943​ Carrying  Value ​$104,212103,465102,673101,833100,943100,000​​

Accepted Answer

A)  No gain or loss.
B)  $3,000 gain.
C)  $1,202 loss.
D)  $327 loss. E) B) and C)
F) None of the above

Question 2

Gains/losses on the early extinguishment of debt are reported as part of operating income in the income statement.Gains/losses on the early extinguishment of debt are reported as non-operating items in the income statement.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following definitions describes a serial bond?

Accepted Answer

A)  Matures on a single date.
B)  Secured only by the "full faith and credit" of the issuing corporation.
C)  Matures in installments.D) None of the above
E) All of the above

Exam 9: Long-Term Liabilities

Gains/losses on the early extinguishment of debt are reported as part of operating income in the income statement.Gains/losses on the early extinguishment of debt are reported as non-operating items in the income statement.

Correct Answer
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Which of the following definitions describes a serial bond?

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Exam 9: Long-Term Liabilities

Gains/losses on the early extinguishment of debt are reported as part of operating income in the income statement.Gains/losses on the early extinguishment of debt are reported as non-operating items in the income statement.

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Which of the following definitions describes a serial bond?

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Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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