Bond Refunding
Response to the following problem:
A company's gains or losses from the early extinguishment of debt theoretically can be accounted for in three ways:
a. Amortized over remaining life of old debt
b. Amortized over the life of the new debt issue
c. Recognized in the period of extinguishment
Required
1. Discuss the supporting arguments for each of the three theoretical methods of accounting for gains and losses from the early extinguishment of debt.
2. Which of the preceding methods is generally accepted?