Question: On December 31 20X0 a Zurich real estate holding company

On December 31, 20X0, a Zurich real estate holding company issued CHF10 million of 10-year, 8% debentures. The market interest rate at issuance was 8%. Suppose that on December 31, 20X1 (after all interest payments had been recorded for 20X1), the company purchased all the debentures for CHF9 million. The debentures had been held by a large insurance company throughout their life. (CHF represents Swiss francs.)
Show all amounts in thousands of Swiss francs.
1. Compute the gain or loss on early extinguishment.
2. By using the balance sheet equation, present an analysis of the December 31, 20X1, transaction on the holding company’s books.
3. Show the appropriate journal entry.

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  • CreatedFebruary 20, 2015
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