Question

Question 34

In a debt extinguishment in which the debt is continued with modified terms and the carrying value of the debt is more than the fair value of the debt,

1. a loss should be recognized by the debtor.

2. a new effective-interest rate must be computed.

3. no interest expense should be recognized in the future.

4. a gain should be recognized by the debtor.

Question 35

Many companies believe that off-balance-sheet financing

1. is attempting to conceal the debt from shareholders by having no

   information about the debt included in the balance sheet.

2. wishes to limit all information related to the debt to the income statement

   and the statement of cash flows.

3. is in violation of IFRS.

4. can enhance the quality of its financial position and perhaps permit credit

   to be obtained more readily and at less cost.

Answer 1

Q34
Answer is d. a gain should be recognized by the debtor

Q35.
Answer is d. can enhance the quality of its financial position and perhaps permit credit to be obtained more readily and at less cost.