In 2010, Tame Co.took advantage of market conditions to refund its outstanding debt.Wild should report the excess of the carrying amount of the old debt over the amount paid to extinguish it as a(n)
A)deferred credit to be amortized over life of new debt
B)part of continuing operations
C)extraordinary item, net of income taxes
D)prior period adjustment

Question

Quizplus · Accepted Answer

When a company refunds its debt it is considered a part of the normal course of business and not a rare or infrequent event. Therefore, the excess amount paid for the old debt should be reported as part of continuing operations. Unlike extraordinary items, this amount would not be reported net of taxes or as a prior period adjustment. It is also not a deferred credit as it does not represent future obligations or benefits.