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29 July, 23:24

Ford Corporation entered into a troubled debt restructuring agreement with their local bank. The bank agreed to accept land with a carrying value of $200,000 and a fair value of $300,000 in exchange for a note with a carrying amount of $425,000. Ignoring income taxes, what amount should Ford report as a gain on its income statement?

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  1. 30 July, 00:16
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    The answer is: $225,000

    Explanation:

    Ford should include a total gain of $225,000 in its income statement.

    That gain is the result of the difference between the carrying value of the asset (land) and the carrying value of the liability (debt note).

    $425,000 - $200,000 = $225,000 as total gain
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