Ormont Corporation owed Landry Inc.,$250,000.Ormont became pressed for cash and was unable to pay the Landry debt when it came due.Rather than force Ormont into bankruptcy,Landry agrees to reduce the debt to $200,000.In which of the following cases will Ormont be required to recognize income from the discharge of the Landry debt?
$\begin{array}{cc}
&\text { Total Liabilities }\
\underline{\text { Total Assets } }& \underline{\text { Before Discharge }} \
a.\$ 2,000,000 & \$ 2,020,000 \
b.\$ 2,000,000 & \$ 3,000,000 \
c.\$ 3,000,000 & \$ 3,300,000 \
d.\$ 3,000,000 & \$ 3,050,000
\end{array}$

Question

Ormont Corporation owed Landry Inc.,$250,000.Ormont became pressed for cash and was unable to pay the Landry debt when it came due.Rather than force Ormont into bankruptcy,Landry agrees to reduce the debt to $200,000.In which of the following cases will Ormont be required to recognize income from the discharge of the Landry debt?
$\begin{array}{cc}
&\text { Total Liabilities }\
\underline{\text { Total Assets } }& \underline{\text { Before Discharge }} \
a.\$ 2,000,000  & \$ 2,020,000 \
b.\$ 2,000,000 & \$ 3,000,000 \
c.\$ 3,000,000 & \$ 3,300,000 \
d.\$ 3,000,000 & \$ 3,050,000
\end{array}$

Quizplus · Accepted Answer

The Answer of Ormont Corporation owed Landry Inc.,$250,000.Ormont became pressed for cash and was unable to pay the Landry debt when it came due.Rather than force Ormont into bankruptcy,Landry agrees to reduce the debt to $200,000.In which of the following cases will Ormont be required to recognize income from the discharge of the Landry debt?
$\begin{array}{cc}
&\text { Total Liabilities }\
\underline{\text { Total Assets } }& \underline{\text { Before Discharge }} \
a.\$ 2,000,000  & \$ 2,020,000 \
b.\$ 2,000,000 & \$ 3,000,000 \
c.\$ 3,000,000 & \$ 3,300,000 \
d.\$ 3,000,000 & \$ 3,050,000
\end{array}$

Ormont Corporation Owed Landry Inc