Canterbury Co. issues a discounted, non-interest-bearing note in exchange for borrowed funds. Choose whether the cash received will be higher or lower than the face value of the note, and whether the effective annual interest rate will be higher or lower than the discount rate:

Cash Received vs. Face Value of Note

Effective Rate vs. Discount Rate

a. Lower Higher

b. Higher Higher

c. Lower Lower

d. Higher Lower

For a troubled debt restructuring involving only a modification of terms, which of the following items specified by the new terms would be compared to the carrying amount of the debt to determine if the debtor should report a gain on restructuring?

a. The total future cash payments.

b. The amount of future cash payments designated as principal repayments.

c. The present value of the debt at the original interest rate.

d. The present value of the debt at the modified interest rate.