Question

The early retirement of a bond includes . multiple select question.

a. receipt of cash by the company that issued
b. the bonds recording of a gain or loss
c. increase in the liability elimination of the liability
d. payment of cash

Answer 1

The early retirement of a bond includes the receipt of cash by the issuing company, the recording of a gain or loss, the elimination of the liability, and the payment of cash to the bondholders.

Step-by-step explanation:

The early retirement of a bond includes multiple actions:

• Receipt of cash by the company that issued the bonds, as investors purchase the bonds.
• The recording of a gain or loss, which occurs if the redemption price differs from the carrying amount of the bond liability.
• Elimination of the liability on the balance sheet, representing the bond's principal amount that no longer needs to be repaid.
• Payment of cash, which is the cash outflow that the company makes to the bondholders to retire the bonds early.