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EXERCISE 14-21 - *EXERCISE 14-21(2030 minutes(a No The gain...

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*EXERCISE 14-21 (20–30 minutes) (a) No. The gain recorded by Barkley is not equal to the loss recorded by American Bank under the debt restructuring agreement. (You will see why this happens in the following four exercises.) In response to this “accounting asymmetry” treatment, GAAP did not address debtor accounting because the FASB was concerned that expansion of the scope of its pronouncement would delay issuance of GAAP for the creditor. (b) No. There is no gain under the modified terms because the total future cash flows after restructuring exceed the total pre- restructuring carrying amount of the note (principal): Total future cash flows after restructuring are: Principal ................................................................... $2,400,000 Interest ($2,400,000 X 10% X 3) ............................. 720,000 $3,120,000 Total pre-restructuring carrying amount of note (principal): ...................................................................... $3,000,000
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*EXERCISE 14-21 (Continued) (c) The interest payment schedule is prepared as follows:
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