In a Troubled Debt Restructuring Involving Only the Modification of Terms

question 28

Multiple Choice

In a troubled debt restructuring involving only the modification of terms of a loan receivable, how should the loan receivable be measured on the creditor's balance sheet?

• A)​The loan's observable market price.
• B)​The fair value of the collateral if the loan is collateral dependent.
• C)​The present value of expected future cash flows at the original contractual rate.
• D)​All of the above.

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Definitions:

Current Ratio

The current ratio is a liquidity metric that measures a company's ability to pay off its short-term liabilities with its short-term assets.

Note Receivable

A written promise that amounts will be received by the person holding the note, usually involving interest.

Return Ratio

A financial metric used to measure the efficiency or profitability of an investment, calculated by dividing the gain (or loss) from the investment by its cost.

Total Assets

The sum of all assets owned by an entity, including both current and long-term assets, representing the total value of what the entity owns.