Question

When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be

a. reflected currently in income, but not as an extraordinary item.
b. reflected currently in income as an extraordinary item.
c. treated as a prior period adjustment.
d. treated as an adjustment of additional paid-in capital.

Answer 1

When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be reflected currently in income, but not as an extraordinary item.

Step-by-step explanation:

When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be reflected currently in income, but not as an extraordinary item. This means that the difference should be recognized as part of the company's regular income in the current period. It is not considered an extraordinary event that would be disclosed separately.