Troubled Debt Restructuring

Question 1

Creditor grants a principal reduction in troubled debt restructuring.

Answer 1

Dr. Loss on Debt Restructuring
Cr. Notes Receivable

Question 2

Debtor receives principal reduction in troubled debt restructuring

Answer 2

Dr. Notes Payable
Cr. Gain on Debt Restructuring

Question 3

Creditor accepts property in full settlement of debt

Answer 3

Dr. Property
Dr. Loss on Debt Restructuring (if applicable)
Cr. Notes Receivable

Question 4

Debtor transfers property to creditor in full settlement of debt

Answer 4

Dr. Notes Payable
Cr. Property
Cr. Gain on Debt Restructuring (if applicable)

Question 5

Creditor modifies terms of debt, resulting in lower effective interest rate

Answer 5

Dr. Notes Receivable
Cr. Deferred Interest Income

Question 6

Debtor records modification of debt terms with lower effective interest rate

Answer 6

Dr. Notes Payable
Cr. Deferred Gain on Debt Restructuring

Question 7

Creditor forgives accrued interest as part of debt restructuring

Answer 7

Dr. Loss on Debt Restructuring
Cr. Interest Receivable

Question 8

Debtor records forgiveness of accrued interest in debt restructuring

Answer 8

Dr. Interest Payable
Cr. Gain on Debt Restructuring

Question 9

Creditor receives equity interest in debtor’s company as part of debt restructuring

Answer 9

Dr. Investment in Debtor’s Equity
Dr. Loss on Debt Restructuring (if applicable)
Cr. Notes Receivable

Question 10

Debtor issues equity interest to creditor as part of debt restructuring

Answer 10

Dr. Notes Payable
Cr. Common Stock
Cr. Additional Paid-in Capital
Cr. Gain on Debt Restructuring (if applicable)