In a troubled debt restructuring in which the debt is continued with modified terms and the carrying amount of the debt is less than the total future cash flows,
A) a loss should be recognized by the debtor.
B) a gain should be recognized by the debtor.
C) a new effective-interest rate must be computed.
D) no interest expense or revenue should be recognized in the future.

Question

Quizplus · Accepted Answer

A new effective-interest rate must be computed to allocate the revised cash flows over the remaining term of the debt, as the carrying amount of the debt is less than the total future cash flows.

In a Troubled Debt Restructuring in Which the Debt Is