Zambrano Corp.decided to go into the market to repurchase bonds before their due date.The following are the balances of the accounts on the date of the retirement: What is the gain or loss on the early extinguishment of the bonds?

Question

Zambrano Corp.decided to go into the market to repurchase bonds before their due date.The following are the balances of the accounts on the date of the retirement:  What is the gain or loss on the early extinguishment of the bonds?

Quizplus · Accepted Answer

The gain on early extinguishment can be calculated as the carrying amount of the bonds ($2,500,000) minus the cash paid to retire them ($2,525,000), which results in a gain of $25,000. Therefore, the correct choice is C.