Problemon january 1 20x1 red corp acquired some of the, Ask an Expert

Accounting

Problem:

On January 1, 20x1, Red Corp. acquired some of the outstanding bonds of one of its subsidiaries. The bonds had a carrying value of $421,620, and Red paid $401,937 for them.

Required:

Question: How should we account for the difference between the carrying value and the purchase price in the consolidated financial statements for 20x1?

The difference is added to the carrying value of the debt.
The difference is deducted from the carrying value of the debt.
The difference is treated as a loss from the extinguishment of the debt.
The difference is treated as a gain from the extinguishment of the debt.
The difference does not influence the consolidated financial statements.

Note: Be sure to show how you arrived at your answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91164452

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