Chapter 10 Section 5: Troubled Debt Restructuring Flashcards
1
Q
How are gains accounted for by the debtor when an asset is transferred?
A
Ordinary gain: difference between FV and BV of asset transferred
Gain (extraordinary?): difference between carrying amount of payable and FV of asset transferred
2
Q
How are gains accounted for by the debtor when equity interest is transferred?
A
Carrying amount of payable - FV of equity interest
3
Q
How does the creditor account for gains or losses?
A
They are ordinary
4
Q
How does the creditor handle modification of terms?
A
Classify the impairment to bad debt expense, using an allowance for doubtful accounts.
