Exter Company Is Experiencing Financial Difficulties

question 49

Multiple Choice

Exter Company is experiencing financial difficulties.It has assets worth $2 million,but owes liabilities of $2.1 million.It has a longstanding relationship with the bank.The bank has agreed to forgive $300,000 of debt principal.Because of this debt forgiveness,Exter will recognize income of

• A)$0.
• B)$100,000.
• C)$200,000.
• D)$300,000.

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Definitions:

Multiple-class Shares

Stocks issued by a single company that have different rights, dividends, or voting powers, typically designated as Class A, Class B, etc.

Front-end Load

A commission or sales charge applied at the time of the initial purchase of an investment.

SEC Rule 12b-1

A regulation by the U.S. Securities and Exchange Commission that allows mutual funds to charge their shareholders for advertising and sales promotion expenses.

Marketing Expenses

Costs associated with promoting a company, product, or service, including advertising, product samples, and event sponsorships.