On March 1, 20X7, Somar Co. issued 20-year bonds at a discount. By September 1, 20X12, the bonds were quoted at 106 when Somar exercised its right to retire the bonds at 105. How should Somar report the bond retirement on its 20X12 income statement?

Your Answer:

a. A gain in continuing operations.

b. A loss in continuing operations.

c. A gain in discontinued operations.

d. A loss in discontinued operations.

Question

Business

Donaldson

6 April, 07:12

On March 1, 20X7, Somar Co. issued 20-year bonds at a discount. By September 1, 20X12, the bonds were quoted at 106 when Somar exercised its right to retire the bonds at 105. How should Somar report the bond retirement on its 20X12 income statement?

Your Answer:

a. A gain in continuing operations.

b. A loss in continuing operations.

c. A gain in discontinued operations.

d. A loss in discontinued operations.

+2

Answers (1)

Know the Answer?

Nola Stokes · Answer 1

(B) A loss in continuing operations.

Since these bonds were issued at a discount, the carrying value would be lower than the face amount.

Explanation:

Continuing operations refer to all business operations, excluding the segments that are discontinued. A gain or loss on early retirement of dept is recognized as a component of income from continuing operations. Continuing operations generate revenue for the business through the sale of goods and services.