Exhibit 14-12 Sharon owes Lawrence Co. $15,000 on a note payable, plus $3,000 of unpaid interest. Lawrence agrees to accept equipment in full settlement of the debt. The equipment is recorded on Sharon's books at $12,000, and it is currently worth $14,200.
-Refer to Exhibit 14-12. What total amount of ordinary gains should be recorded by Sharon on this troubled debt restructuring?

Question

Quizplus · Accepted Answer

Sharon will recognize an ordinary gain on the troubled debt restructuring equal to the difference between the fair value of the equipment and the carrying amount of the note payable and interest. That is, $14,200 - ($15,000 + $3,000) = $6,000. Therefore, option D is correct.

Exhibit 14-12 Sharon Owes Lawrence Co