On January 1, 20X2, Duke Company Negotiated an Agreement to Modify

On January 1, 20X2, Duke Company negotiated an agreement to modify the terms of a $500,000 note with $38,000 of accrued interest. Payments of $35,000 including interest will be made each quarter end up to and including June 30, 20X6. Which of the following is true about this troubled debt restructuring?

A) Interest expense will be recognized as it is incurred.
B) A gain of $88,000 will be recognized.
C) The present value of the payments must be calculated to determine if there is a gain or loss.
D) None of the above is true.