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NEW QUESTION: 1
Debtor Bank on a 10-year, 15% note in the amount of US $100,000, plus US $30,000 accrued interest. Because if financial difficulty. Debtor has been unable to make annual interest payments for the past 2 years and the n-ate is due today. Accordingly. Bank legally agreed to restructure
Debtor's debt as follows:
The US $30.000 of accrued interest was forgiven.
Debtor was given 3 more years to pay off the debt at 8% interest. Payments are to be made annually at year-end. The present value of the payments using the prevailing rate for similar instruments of an issuer with a similar credit rating is US $84.018.
At the date of the restructuring, Debtor properly records:
A. A loss of US $30.000.
B. No gain or loss because no extinguishments occurred.
C. A gain of US $30.000.
D. A gain of US $45,982.
Answer: D
Explanation:
Derecognition of a financial liability or a part) occurs only by means of extinguishment.
This condition is satisfied only when the debtor pays the creditor or is legally released from primary responsibility either by the creditor or through the legal process. An extinguishment and derecognition of the old debt and recognition of new debt occurs when the borrower and lender exchange debt instruments with substantially different terms, that is, when the respective discounted cash flows differ by at least 10%. A substantial modification of terms is also accounted for as an extinguishment. The difference between the carrying amountincluding unamortized costs) of a liabilityor part) that has been extinguished or transferred and the amount paid is included in profit or loss. This transaction qualifies as an extinguishment based on a substantial modification of terms because the discounted cash flow from the old debtUS $130.000 due immediately and the new debtgiven as US $84.018) differ by at least 10%. Hence, the amount included by Debtor in profit or loss at the date of the restructuring is a US $45,982 gain$130.000 - $84.018) that is. the difference between the carrying amount extinguished and the amount paid the present value of the new debt instrument determined by discounting the cash outflows at the prevailing rate for similar instruments of an issuer with a similar credit rating). The entry is to debit the extinguished liability for accrued interest and principal US $130.000), debit discount on note payable US $15,982), credit note payable US $100.000) and credit gain US $45,982).

NEW QUESTION: 2
What can be changed using a payment plan change (3 answers are correct)
A. Change end of the term of the loan
B. Change instalment due date
C. Change interest rate
D. Change instalment amount
E. Change payment advice details
Answer: A,B,D

NEW QUESTION: 3
Which are levels of internal order planning? There are TWO correctanswers for this question
A. Primary and secondary cost and revenue planning
B. Group costing
C. Overall planning
D. Integrated planning
Answer: C,D