When a Debt Is Forgiven the Accounting Treatment Is To

question 3

Multiple Choice

When a debt is forgiven the accounting treatment is to:

• A) Debit the liability; credit a deferred benefit account.
• B) Credit a gain on release account; debit the liability.
• C) Debit the gain on release account; credit the liability.
• D) Debit a deferred benefit account; credit a debt defeasance account.
• E) None of the given answers.

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Definitions:

Defense Mechanism

Psychological strategies brought into play by individuals, groups, or even nations to cope with reality and to maintain self-image.

Reaction Formation

A defense mechanism where an individual unconsciously replaces unacceptable thoughts or feelings with their opposites.

Pleasure Focus

Orienting attention or actions towards activities or objects that provide a sense of joy, satisfaction, or amusement.

Self-Stimulation

The act of providing stimulation for oneself, often referring to behavior that seeks to activate pleasure centers in the brain.