Under which of the following conditions would a firm have a loss on repurchased debt?
A)face value exceeds current market price of bonds
B)current market price exceeds face value of bonds
C)current market price exceeds carrying value of bonds
D)current market price exceeds original issue price of bonds

Question

Quizplus · Accepted Answer

When a firm repurchases its debt at a price higher than its carrying value (book value), it incurs a loss, as it is paying more than the accountants have assigned as the debt's value. Hence, option C (current market price exceeds carrying value of bonds) is the correct choice. Options A, B, and D are incorrect because they describe scenarios where the firm would have a gain on repurchased debt.

Under Which of the Following Conditions Would a Firm Have