The February 2, 2002, edition of the Wall Street Journal includes an article by Mark Maremount entitled

“Tyco May Alter Plan to Buy Back $11 Billion in Bonds with Tenders.” (You can access the article at the KWW website.)

Instructions Read the article and answer the following questions.

(a) Tyco had announced earlier that it intended to “tender” for $11 billion of its bonds. Now it says it may repurchase the bonds in the open market. What’s the difference between a “tender” and an openmarket purchase?

(b) How would the transaction (tender or repurchase) be reported in the income statement? That is, what amount would be reported, and where would it appear?

(c) Under U.S. GAAP, should Tyco write down its bonds to their current market value? What accounting principle would justify this treatment?