In a Troubled Debt Restructuring Where the Debtor Elects to Transfer

question 22

Multiple Choice

In a troubled debt restructuring where the debtor elects to transfer an equity interest to a creditor in exchange for the satisfaction of an outstanding debt:

• A)​the debtor may recognize a gain on restructure when the market value of the equity interest is greater than the book value of the debt plus any accrued interest
• B)​the debtor may recognize a gain on restructure when the market value of the equity interest is less than the book value of the debt plus any accrued interest
• C)​any difference between market value of equity interest and book value of the debt plus accrued interest must be recorded in Retained Earnings.
• D)​any difference between market value of equity interest and book value of the debt plus accrued interest must be recorded in Additional Paid in Capital in Excess of Par.

Apply the concept of the time value of money to capital investment analysis.

Calculate the cash payback period for capital investment projects.

Determine the net present value and present value index of investment projects.

Compute the internal rate of return for investment proposals.

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Definitions:

Book Value

The net value of a company's assets minus its liabilities, often used as an estimate of the company's worth.

Common Shares

Equity securities that represent ownership in a corporation, giving shareholders voting rights and a share in the company's profits via dividends.

Dividend Yield

Dividend yield is a financial ratio that indicates how much a company pays out in dividends each year relative to its stock price.

Earnings per Share

A key financial metric that indicates the portion of a company's profit allocated to each outstanding share of common stock.