On December 31, 2012, Nolte Co. is in financial difficulty and cannot pay a note due that day. It is a $1,800,000 note with $180,000 accrued interest payable to Piper, Inc. Piper agrees to accept from Nolte equipment that has a fair value of $870,000, an original cost of $1,440,000, and accumulated depreciation of $690,000. Piper also forgives the accrued interest, extends the maturity date to December 31, 2015, reduces the face amount of the note to $750,000, and reduces the interest rate to 6%, with interest payable at the end of each year.

Nolte should recognize a gain or loss on the transfer of the equipment of

a. $0.

b. $120,000 gain.

c. $180,000 gain.

d. $570,000 loss.

Nolte should recognize a gain on the partial settlement and restructure of the debt of

a. $0.

b. $45,000.

c. $165,000.

d. $225,000.

Answer rating: 100% (QA)

B 120000 gain Nolte should recognize a gain of 120000 on the transfer of the equipment ... View the full answer