Case Synthesis

Case Synthesis 2 : Carter Manufacturing Case Background due to money flow problems, Carter has a debt to its bondholders. The market survey of bonds dropped to $30 meg ($50 zillion at par). It is agreed that totally the bonds be exchanged into preference share with market value of $30 million. The auditor argues that the difference is an extraordinary wee from degraded debt restructuring. However, as Carter is facing bankruptcy, the accountant of Carter cannot accept to report $20 million as a gain. We will now counselling on intervention and financial statement implications in report gain on troubled debt restructuring and exchange of bonds for preference shares. preserve a gain on troubled debt restructuring To avoid bankruptcy proceedings, in that location are three ways for the bondholders to allot a conceding and settle the Carters debt for less than its carrying count: 1. Asset shift (Non-cash asset transfer) or lawfulness switch (Equity interest transfer) ? If the Carrying treasure of the debt is great than the Fair mart seat of the assets transferred or the honor interests provided, a gain is recorded. 2. Modification of call ( demoralize interest rate, annex maturity date or lower face amount) ? If the Carrying Value of the debt is greater than the Future Cash hightail it 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 greater than the Fair Mark et Value of the preference shares ($30 milli! on), a restructured gain of $20 million should be recognized. Here comes the proportion between the treatment of auditor and Carters accountant: 1. accountants 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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