In a troubled debt restructuring in which the debt is continued with modified terms, a gain should be recognized at the date of restructure, but no interest expense should be recognized over the remaining life of the debt, whenever the
A) carrying amount of the pre-restructure debt is less than the total future cash flows.
B) carrying amount of the pre-restructure debt is greater than the total future cash flows.
C) present value of the pre-restructure debt is less than the present value of the future cash flows.
D) present value of the pre-restructure debt is greater than the present value of the future cash flows.

Question

Quizplus · Accepted Answer

In a troubled debt restructuring where the debt continues with modified terms, a gain is recognized when the carrying amount of the pre-restructure debt is greater than the total future cash flows. This indicates that the debtor is repaying less than the original amount owed, leading to a gain recognition. Interest expense may still be recognized over the remaining life of the debt based on the new terms, contrary to the statement provided.

In a Troubled Debt Restructuring in Which the Debt Is