Case Synthesis

Case Synthesis 2 : Carter Manufacturing Case Background Due to bullion flow problems, Carter has a debt to its bondholders. The trade look on of bonds dropped to $30 one thousand thousand ($50 zillion at par). It is agreed that all the bonds be permutationd into perceptiveness make do with market value of $30 cardinal. The auditor argues that the difference is an one(prenominal) wee from exuberant debt restructuring. However, as Carter is facing bankruptcy, the accountant of Carter cannot undertake to report $20 million as a get together. We exit now focus on intervention and financial record implications in reporting consume ground on troubled debt restructuring and exchange of bonds for preference shares. Recording a gain on troubled debt restructuring To avoid bankruptcy proceedings, in that location are deuce-ace ways for the bondholders to grant a conceding and settle the Carters debt for less than its carrying amount: 1. plus shift (Non-cash asset transfer) or Equity craft (Equity concern transfer) ? If the Carrying treasure of the debt is greater than the unobjectionable mart place of the assets transferred or the honor amuses provided, a gain is recorded. 2. Modification of terms (lower interest rate, annex maturity consider or lower vista amount) ? If the Carrying Value of the debt is greater than the prox Cash Flow later on restructuring, a gain is recorded.

In the case, Carter has been granted for an Equity Swap by transferring the debt into preference shares. Since the carrying value of debt ($50 million) is greater than the comely Market Value of the preference shares ($30 million), a restructured gain of $20 million should be recognized. Here comes the comparison betwixt the treatment of auditor and Carters accountant: 1. Accountants treatment Bonds collectible50,000,000 Preference shell out Capital50,000,000 2. attendees treatment Bonds payable50,000,000 Preference Share Capital...If you want to get a adept essay, order it on our website: Orderessay

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