Debt Extinguishment

Question 1

Retirement of bonds

Answer 1

Book value (-) call amount = G/L
1) BV= unamortized bonds +/- Face amount
2) call amount = Face amount (x) settlement price

Question 2

Asset transfer that has a G/L on the payable.

Answer 2

Assets transferred to trouble debt at fair value, G/L is recorded as “ Ordinary”
Value of liability (-) FMV of asset = G/L
If liability is greater than there is a gain on payable.

Question 3

Asset transfer that has a G/L on the “Asset itself”.

Answer 3

Assets have a carry value and a FMV. if the carry value is greater than FMV, the asset it has a loss.

Question 4

When extinguishing bonds how is the excess treated?

Answer 4

Any excess of debt after refinance is a gain.