Bond Indebtedness and Maturity
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Why would a company want to reduce its bond indebtedness before its bonds reach maturity? Indicate how this can be done and the correct accounting treatment for such a transaction.
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Solution Summary
The solution clearly explains the treatment when a company chooses to retire a bond before the maturity date. Specific debt and credit entries are shown as well.
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Companies retire bonds before they are due. There can be several reasons why they do this.
- Changes in Interest rate: If the company can secure a lower interest rate based on market conditions, they will refinance in order to lower the interest expense and increase the net income for the company.
- Investment opportunities: There may not be anything ...
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