On Jan 1, 2011, Riley Corp acquired some of the outstanding bonds of one of its

Question

On Jan 1, 2011, 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 prive in the consolidated financial statements for 2011?

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 los 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

Explanation / Answer

d.) the difference is treated as a gain from the extinguishment of the debt

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