In a troubled debt restructuring in which the debt is settled by a transfer of assets with a fair market value less the carrying amount of the debt, the debtor would
A) not recognize a gain or loss on the settlement.
B) recognize a gain on the settlement.
C) recognize a loss on the settlement.
D) only record a memo in the general ledger.

Question

Quizplus · Accepted Answer

In a troubled debt restructuring where the debt is settled by transferring assets with a fair market value less than the carrying amount of the debt, the debtor recognizes a gain. This gain is the difference between the carrying amount of the debt and the fair market value of the assets transferred, reflecting the reduction in the debtor's obligation.

In a Troubled Debt Restructuring in Which the Debt Is