Exter Company is experiencing financial difficulties.It has assets worth $2 million,but owes liabilities of $2.1 million.It has a longstanding relationship with the bank.The bank has agreed to forgive $300,000 of debt principal.Because of this debt forgiveness,Exter will recognize income of

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According to the question, the bank forgives $300,000 of debt principal. This means that Exter's liabilities will decrease by $300,000. As a result, Exter's assets ($2 million) will exceed its liabilities ($1.8 million), resulting in a net increase in Exter's equity. This increase in equity represents income for Exter. Hence, Exter will recognize income of $200,000 (the difference between the forgiven debt principal of $300,000 and the remaining liabilities of $100,000). Therefore, the best choice is C.

Exter Company Is Experiencing Financial Difficulties