F5 - M6 - Troubled Debt Restructuring and Extinguishment

Question 1

___________ generally involves a creditor granting concessions to a debtor which would not be likely under normal circumstances in order to increase the likelihood of collection.

Answer 1

A troubled debt restructuring

Question 2

For Troubled debt restructuring - The debtor will recognize a ______ for the excess of the carrying amount of the payable (including accrued interest) over the fair value of the assets given up.

Answer 2

gain

Question 3

For Troubled debt restructuring - The debtor will recognize a gain for the excess of the ______amount of the payable (including accrued interest) over the ____________ of the assets given up.

Answer 3

carrying amount ; fair value

Question 4

An ___________ may result from the difference between the FV and the NBV of the asset transferred

Answer 4

ordinary gain or loss

Question 5

A restructuring may involve a (3)

Answer 5

combination of asset transfer, equity transfer, and modification of terms.

Question 6

If an equity interest is transferred, there may be a _____ to the extent that the __________ transferred exceeds the face of the payable.

Answer 6

gain; FV of the equity

Question 7

If there is a modification of terms, the debtor does not change the carrying amount of the debt unless it ______________ specified under the new terms.

Answer 7

exceeds the total future cash payments

Question 8

From the creditor’s standpoint, these loans are treated as ________ if it is probable that the creditor will be unable to collect the amounts due under the original contract.

Answer 8

impaired

Question 9

________(and a corresponding allowance for _____________) may be recorded by the creditor when there is a modification of terms associated with the impairment.

Answer 9

Bad debt expense; credit losses

Question 10

Corporations issuing bonds may _________ them prior to maturity.

Answer 10

call or retire

Question 11

___________can be retired after a certain date at a stated price.

Answer 11

Callable bonds

Question 12

_______ allow an existing issue to be retired and replaced with a new issue at a lower interest rate.

Answer 12

Refundable bonds

Question 13

A ______ cannot be derecognized in the financial statements until it has been extinguished.

Answer 13

liability

Question 14

A ______ is considered extinguished if the debtor pays or the debtor is legally released.

Answer 14

liability