[Anonymous]

Ace corp entered into a troubled debt restructure agreement. The agreement was for the bank to accept land with a carrying value of 75k and a fair value of 100k, in exchange for a note with a carrying amount of 150k. Disregarding income tax, what amount should Ace report as a gain on its income statement

Becker says that the answer is 50k.

Wouldn’t there be 2 different gains on the income statement? One for 50k (for the restructure) and 25k (for the disposal of land)? Is it me or does the wording just suck on this?

[Anonymous]

There was another question like this. Basically there was an agreement to forgive a note payable with a carrying amount of 185k in exchange for land. Land's CV was 85k; fair value was 120k.

the question was: Disregarding income taxes, what amount should Casey report as a gain in its income statement?

The “correct answer” was 65k. Isn't there another gain on the Income statement of 35k (for the disposal of land), which means that the answer should actually be 100k???

[Anonymous]

Here's the question on another thread:

What are the Journal Entries for this MCQ?

Some of these questions pop up over and over on the forums because people have trouble with them.

[Tom]

Does the question actually end with “on its income statement” or does it refer specifically to the restructuring of the debt?

AUD - 91
BEC - 86
FAR - 87
REG - 79

I'm done!

FAR - 87!!!
AUD - TBD (8/15/16)
REG - TBD (10/01/16)
BEC - TBD

[Anonymous]

the question explicitly says, “disregarding income taxes, what amount should Casey report as a gain in its income statement”

no specification of gain on restructure or gain on disposal. total BS on Becker's part.

It's weird. When I looked up the same question, it was worded as “what is the gain on the restructure”. I think it was updated with some ambiguous ass wording. I really hope that the wording isn't terrible like this on the real exam

[MaLoTu]

Yeah, without the restructure part that answer is not completely right. I agree it was probably to do with the update and probably an oversight. You should report it.

Almost always from my phone... please excuse my typos!

All 4 passed - 2016

CA CPA

[Author]

Replies