In order to finance Darkness Company’s planned expansion, a 12% P10,000,000 face value bonds were issued for P10,800,000, including accrued interest of P200,000 on December 1, 2014. Interest is payable every October 1 and April 1. By the end of the year 2016, the carrying amount of the bonds was reported at P10,300,000. Darkness uses the straight line method to amortize premium and discount. On September 1, 2017, Darkness decided to reacquire the bonds at face value plus accrued interest. What amount should Darkness record as gain on this early extinguishment of debt? A. 204,000 B. 192,000 C. 140,000 D. 120,000

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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In order to finance Darkness Company’s planned expansion, a 12% P10,000,000 face value bonds were issued for
P10,800,000, including accrued interest of P200,000 on December 1, 2014. Interest is payable every October 1 and
April 1. By the end of the year 2016, the carrying amount of the bonds was reported at P10,300,000. Darkness uses the
straight line method to amortize premium and discount. On September 1, 2017, Darkness decided to reacquire the
bonds at face value plus accrued interest. What amount should Darkness record as gain on this early extinguishment of
debt?

A. 204,000 B. 192,000 C. 140,000 D. 120,000

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