Suede Corp

Multiple Choice

Suede Corp.called an outstanding bond obligation four years before maturity.At that time there was an unamortized discount of $150,000.To extinguish this debt, Suede had to pay a call premium of $75,000.Ignoring income tax considerations, how should these amounts be treated for accounting purposes?

A) Amortize $225,000 over four years.
B) Record a $225,000 loss in the year of extinguishment.
C) Record a $75,000 loss in the year of extinguishment and amortize $150,000 over four
Years.
D) Either amortize $225,000 over four years or record a $225,000 loss immediately,
Whichever management selects.