Case Synthesis

Case Synthesis 2 : Carter Manufacturing Case Background delinquent to money flow problems, Carter has a debt to its bondholders. The market set of bonds dropped to $30 meg ($50 zillion at par). It is agreed that in all the bonds be exchanged into preference share with market value of $30 million. The auditor argues that the difference is an extraordinary wee from tumultuous debt restructuring. However, as Carter is facing failure, the accountant of Carter cannot accept to report $20 million as a gain. We will now focalisation on intervention and financial statement implications in report gain on troubled debt restructuring and exchange of bonds for preference shares. written text a gain on troubled debt restructuring To avoid bankruptcy proceedings, in that location are three ways for the bondholders to shell out a conceding and settle the Carters debt for less than its carrying tot: 1. Asset shift (Non-cash asset transfer) or uprightness flip-flop (Equity interest transfer) ? If the Carrying treasure of the debt is greater than the Fair mart key of the assets transferred or the honor interests provided, a gain is recorded. 2. Modification of equipment casualty ( start out interest rate, annex maturity date or lower face amount) ? If the Carrying Value of the debt is greater than the Future Cash emanate after 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 great er than the Fair Market Value of the prefere! nce shares ($30 million), a restructured gain of $20 million should be recognized. Here comes the coincidence between the treatment of auditor and Carters accountant: 1. controllers treatment Bonds collectible50,000,000 Preference Share Capital50,000,000 2. Auditors treatment Bonds payable50,000,000 Preference Share Capital...If you want to get a adept essay, order it on our website: OrderCustomPaper.com

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