If bonds are retired by an issuer by purchase on the open market at a price below the bonds' carrying value,a gain will result.

Question

Quizplus · Accepted Answer

If a bond is retired by an issuer through open market purchase at a price below its carrying value (the value at which it is recorded in the issuer's books), the issuer will realize a gain. This is because the carrying value represents the amount at which the bond was originally issued, and purchasing it at below that price effectively reduces the issuer's liability. The difference between the purchase price and the carrying value represents a gain for the issuer.

If Bonds Are Retired by an Issuer by Purchase on the Open