GAAP considers debt extinguished if one of the following occurs:
* the creditor has been paid in full and has released the company from any further obligations.
* the debtor is legally released from being the primary responsible party to the debt.

Question

Quizplus · Accepted Answer

This is correct according to GAAP guidelines for debt extinguishment. If either of these two conditions are met, the debt is considered extinguished and should be removed from the company's financial statements.

GAAP Considers Debt Extinguished If One of the Following Occurs