Bond Company renegotiates its debt with Bahamas Bank in a troubled debtrestructuring. The present value of the new cash flows is less than the bookvalue of the debt, but the undiscounted cash flows exceed the book value ofthe debt.Multiple choice question.
Bond company would record a gain.Reason:It does not record a gain or a loss.
Bahamas Bank would not record a gain or a loss.Reason:It will record a loss.
Bahamas Bank would record a gain.Reason:It will record a loss.
Bond company would not record a gain or a loss.