Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
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Question
Chapter 14, Problem 14.21Q
To determine
Troubled Debt Restructuring
When the unique terms of a debt agreement is encouraged by the financial complications by the debtor (borrower), the new agreement is referred to as a troubled debt restructuring. It includes some allowances on the part of the creditors (issuer).
To find out: The accounting classifications of troubled debt restructuring.
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When the original terms of a debt agreement are changed because of financial difficulties experienced by the debtor (borrower), the new arrangement is referred to as a troubled debt restructuring. Such a restructuring can take a variety of forms. For accounting purposes, these possibilities are categorized. What are the accounting classifications of troubled debt restructurings?
(Based on Appendix 14B) When the original terms of a debt agreement are changed because of financialdifficulties experienced by the debtor (borrower), the new arrangement is referred to as a troubled debtrestructuring. Such a restructuring can take a variety of forms. For accounting purposes, these possibilities arecategorized. What are the accounting classifications of troubled debt restructurings?
When a debtor is in financial difficulty and a current londer grants concessions to the debtor to refinance an existing debt arrangement, this is referred to as a
O a. Troubled debt restructuring.
O b. Debt extinguishment.
O c. Debt modification.
O d. Debt pay-off.
Chapter 14 Solutions
Intermediate Accounting, 10 Ed
Ch. 14 - How is periodic interest determined for...Ch. 14 - As a general rule, how should long-term...Ch. 14 - How are bonds and notes the same? How do they...Ch. 14 - What information is contained in a bond indenture?...Ch. 14 - How is the price determined for a bond (or bond...Ch. 14 - A zero-coupon bond pays no interest. Explain.Ch. 14 - Prob. 14.8QCh. 14 - Compare the two commonly used methods of...Ch. 14 - Prob. 14.10QCh. 14 - When a notes stated rate of interest is...
Ch. 14 - How does an installment note differ from a note...Ch. 14 - Prob. 14.13QCh. 14 - Prob. 14.14QCh. 14 - Air Supply issued 6 million of 9%, 10-year...Ch. 14 - Both convertible bonds and bonds issued with...Ch. 14 - Prob. 14.17QCh. 14 - Cordova Tools has bonds outstanding during a year...Ch. 14 - If a company prepares its financial statements...Ch. 14 - (Based on Appendix 14A) Why will bonds always sell...Ch. 14 - Prob. 14.21QCh. 14 - Prob. 14.22QCh. 14 - Prob. 14.23QCh. 14 - Bank loan; accrued interest LO132 On October 1,...Ch. 14 - Non-interest-bearing note; accrued interest LO132...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Straight-line interest on bonds LO142 On January...Ch. 14 - Investment in bonds LO142 On January 1, a company...Ch. 14 - Note with unrealistic interest rate LO143 On...Ch. 14 - Installment note LO143 On January 1, a company...Ch. 14 - Prob. 14.12BECh. 14 - Bonds with detachable warrants LO145 Hoffman...Ch. 14 - Convertible bonds LO145 Hoffman Corporation...Ch. 14 - Prob. 14.22ECh. 14 - Prob. 14.36ECh. 14 - Prob. 14.14PCh. 14 - Prob. 14.17PCh. 14 - Prob. 14.21PCh. 14 - Prob. 14.3DMP
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Similar questions
- What does the term "composition" refer to when discussing the debt restructuring process? Multiple Choice Cancellation of specific debt. Issuance of new debt. Reduction in debt payments. Issuance of new equity to pay off debt. Postponement of debt payments.arrow_forwardWhat is meant by “accounting symmetry” between the entries recorded by the debtor and creditor in a troubled-debt restructuring involving a modification of terms? In what ways is the accounting for troubled-debt restructurings non-symmetrical?arrow_forwardIn negotiating and effecting a troubled debt restructuring, the creditor usually incurs various legal costs. The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally accepted accounting principles. Required: 1. Obtain the relevant authoritative literature on the accounting treatment of legal fees incurred by a creditor to effect a troubled debt restructuring using the FASB Accounting Standards Codification at the FASB website (asc.fasb.org ). 2. What is the specific citation that describes the guidelines for reporting legal costs? 3. What is the appropriate accounting treatment?arrow_forward
- In the context of handling debt - like items in M&A, what is the most buyer-friendly approach for items representing a hard claim that must be paid post-close? a. Purchase price adjustments b. Escrow accounts c. Insurance policies d. Working capital adjustments e. Debt refinancingarrow_forwardIn negotiating and effecting a troubled debt restructuring, the creditor usually incurs various legal costs. The FASBAccounting Standards Codification represents the single source of authoritative U.S. generally accepted accounting principles.Required:1. Obtain the relevant authoritative literature on the accounting treatment of legal fees incurred by a creditor toeffect a troubled debt restructuring using the FASB Accounting Standards Codification at the FASB website(www.fasb.org).2. What is the specific citation that describes the guidelines for reporting legal costs?3. What is the appropriate accounting treatment?arrow_forwardWhat are the general rules for measuring gain or loss byboth creditor and debtor in a troubled-debt restructuringinvolving a settlement?arrow_forward
- A debt restructuring that involves a modification of terms and does not require court approval may not require the recognition of subsequent interest expense. True or Falsearrow_forwardWhat is meant by “accounting symmetry” between theentries recorded by the debtor and creditor in a troubleddebtrestructuring involving a modification of terms? Inwhat ways is the accounting for troubled-debt restructuringsnon-symmetrical?arrow_forwardIn a troubled-debt situation, why might the creditor grant concessions to the debtor?arrow_forward
- Who is more likely to record a loss from debt restructuring? A. depends on the situation B.creditor C.both debtor and creditor D. debtorarrow_forwardIn accounting for short-term debt expected to be refinanced to long-term debt: a. GAAP uses the authorization date to determine classification of short-term debt to be refinanced. b. IFRS uses the authorization date to determine classification of short-term debt to be refinanced. c. IFRS and GAAP use the financial statement date to determine classification of short-term debt to be refinanced. d. GAAP uses the date of issue, but only for secured debt, to determine classification of short-term debt to be refinanced.arrow_forwardThe restructuring of a debt is set forth in FASB ASC 470. True of Falsearrow_forward
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