Which of the Following Is True for Accounting for a Troubled

question 66

Multiple Choice

Which of the following is true for accounting for a troubled debt restructuring by a modification of terms by the debtor?

• A) If undiscounted cash flows after restructuring are greater than carrying value of the debt before restructuring, recognize a gain.
• B) If undiscouraged cash flows after restructuring are greater than carrying value of the debt before restructuring, recognize no gain and impute new interest rate.
• C) If present value of cash flows after restructuring is greater than carrying value of the debt before restructuring, recognize a gain.
• D) If undiscouraged cash flows after restructuring are less than carrying value of the debt before restructuring, recognize NO gain and impute new interest rate.

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Definitions:

Irrevocable Offer

An offer that cannot be withdrawn or canceled by the offeror for a specified period, assuming the offeree has given some consideration in exchange for the offer's irrevocability.

Merchant

An individual or entity engaging in the selling of goods or services professionally or commercially.

UCC

Uniform Commercial Code, a comprehensive set of laws governing all commercial transactions in the United States, intended to standardize and simplify the law.

Legal Sufficiency

The measure of whether a legal document or action meets the minimum requirements of the law to be enforceable.