q 18

QUESTION 18 Sigma Company issued $12 million in 10 percent bonds 6 years ago currently having a carrying amount of $107 million. The bond agreement allows for early extinguishment by Sigma Company beginning in the current year. Sigma's investment bank has arranged for the company to issue $10 million of new 8 percent bonds at face value to a group of investors. The proceeds will be used to extinguish the 10 percent bonds. The banking, legal, and accounting costs to execute the transaction total of $200,000 The Journal entry to record the debt extinguishment will include: a debit to Bonds Payable 8% for $10,000,000 ob a credit to Gain on Extinguishment of 10% Bonds for $500,000 a credit to Bonds Payable-10% for $12,000,000 d. a debit to Loss on Extinguishment of 10% Bonds for of $200.000