Financial Accounting and Reporting-CPA Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the Financial Accounting and Reporting-CPA Exam. Study with flashcards and multiple choice questions, each question has hints and explanations. Get ready for your exam!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

Which of the following is NOT included in the calculation of bond extinguishment?

Face value of the bond
Unamortized premium or discount
Market interest rate
Net carrying value

The correct answer is: Market interest rate

In the calculation of bond extinguishment, the elements that are typically considered include the face value of the bond, any unamortized premium or discount, and the net carrying value of the bond. These components provide a comprehensive view of the bond's total value at the time of extinguishment. The face value of the bond represents the amount the issuer must pay to bondholders at maturity, while the unamortized premium or discount affects the carrying value of the bond on the balance sheet. The net carrying value is essential as it reflects the amount that will be settled upon extinguishment, incorporating both the initial recognition of the bond and the adjustments for premiums or discounts over time. The market interest rate, on the other hand, does not play a direct role in the calculation of bond extinguishment. While market conditions may influence decisions related to refinancing, it is not a component that is factored into the arithmetic of determining what is owed upon extinguishing the bond. This distinction clarifies why the market interest rate is not included in the calculation, making it the correct answer to the question.