Question
Exercise 14-22 (Part Level Submission) On December 31, 2020, American Bank enters into a debt restructuring agreement with Bramble Company, which is now experiencing financial
Exercise 14-22 (Part Level Submission) On December 31, 2020, American Bank enters into a debt restructuring agreement with Bramble Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $2,720,000 note receivable by the following modifications:
1. Reducing the principal obligation from $2,720,000 to $2,176,000.
2. Extending the maturity date from December 31, 2020, to January 1, 2024.
3. Reducing the interest rate from 12% to 10%.
Bramble pays interest at the end of each year. On January 1, 2024, Bramble Company pays $2,176,000 in cash to American Bank.
a) Will the gain recorded by Bramble be equal to the loss recorded by American Bank under the debt restructuring?
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