Ask Question
BusinessBusiness
19 December, 16:34

Cary is experiencing cash flow problems during the current year. Rather than foreclose an $80,000 business loan, his bank agrees to reduce the debt to $50,000. Prior to the debt reduction, Cary's total assets were $500,000 and his total liabilities were $510,000. How much income must Cary recognize from the reduction of his bank loan? a. - 0 - b. $10,000 c. $20,000 d. $30,000

+5
Answers (2)
  1. 19 December, 16:36
    0
    Reduction in debt = Existing Loan - Reduced loan

    = $80,000 - $50,000

    = $30,000

    The income to recognize from the reduction in loan = $30,000

    Explanation:

    The $30,000 reduction in loan is a saving to the company. Thus, it should be recognized as an income by Cary. Reduction in liability is an inflow to the company.
  2. 19 December, 16:41
    0
    Answer:d. $30,000

    Explanation:

    The reduction of loan amount from $80,000 to $50,000 means carry has gained the difference of $30,000 by paying less than the value of loan he has received.

    On an overall analysis the net asset will improve from - $10,000 to $20,000 but the income from the loan reduction is $30,000 i. e,$80,000 minus $50,000.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Cary is experiencing cash flow problems during the current year. Rather than foreclose an $80,000 business loan, his bank agrees to reduce ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
Sari puts $100 into an account with an interest rate of 10 percent. According to the rule of 70, about how much does she have at the end of 21 years? a. $800 b. $210 c. $1,010 d. $300
Answers (1)
Whiplash Ltd. makes a single product and only one type of direct material is used to make this product.
Answers (1)
On april 1, santa fe, inc. Paid griffith publishing company $1,548 for 36-month subscriptions to several different magazines. Santa fe debited the prepayment to a prepaid subscriptions account, and the subscriptions started immediately.
Answers (1)
Consider the case of Yellow Duck Distribution Company: Yellow Duck Distribution Company is expected to generate $180,000,000 in net income over the next year.
Answers (1)
I am usually satisfied with work that is "good enough." true or false?
Answers (1)
New Questions in Business
Fixed expenses: a. includes labor, raw materials, and commissions. b. can be estimated by taking into consideration the production. c. are incurred regardless of sales volume. d. must be linked to strategy in the business plan
Answers (1)
4) Which of the following is least likely to be your primary health care provider? a. an allergist b. an internist c. an obstetrician-gynecologist
Answers (1)
T/F A macroeconomist would be concerned with the following statement. "Two major hurricanes caused significant damage to the eastern seaboard and led to a fall in GDP and a rise in unemployment in the U. S. economy."
Answers (1)
At the beginning of the year, Mitchum Enterprises allows for estimated uncollectible accounts of $14,000. By the end ofthe year, actual bad debts total $15,000. Record the write-off to uncollectible accounts.
Answers (1)
Landor Appliance Corporation makes and sells electric fans. Each fan regularly sells for $40. The following cost data per fan is based on a full capacity of 155,000 fans produced each period.
Answers (1)
Home » Business » Cary is experiencing cash flow problems during the current year. Rather than foreclose an $80,000 business loan, his bank agrees to reduce the debt to $50,000.
Sign Up Forgot Password?