Harper Co. has outstanding $100 million of 5% bonds, due in 7 years, and callable at 102. The bonds were issued at par and are selling today at a market price of 92. 14. Refer to the above data. If

Harper Co. has outstanding $100 million of 5% bonds, due in 7 years, and callable at 102. The bonds were issued at par and are selling today at a market price of 92.

14. Refer to the above data. If Harper Co. retires $10 million of these bonds by purchasing them from bondholders at current market price, the company will report:

Answer

A) An $800,000 gain.

B) A $200,000 loss.

C) An unrealized gain.

D) None of the above; neither gains nor losses are recognized on early retirements of debt.

15. Refer to the above data. If Harper Co. calls $10 million of these bonds it will report:

Answer

A) An $800,000 gain.

B) A $200,000 loss.

C) An unrealized gain.

D) None of the above; neither gains nor losses are recognized on early retirements of debt.

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