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:

Answer:

 Cash Received vs. Face Value of Note Lower Effective Rate vs. Discount Lower

Explanation to the above answer

I  general if note is discounted then the issuer will get the maturity value and it is the face value amount in the case of non interest bearing and it is reduced by the discount and because of all these cash received is lower than the face value the discount should be the rate multiplication with the maturity value and adjusted during its time period of note . Upon its repayment the  effective rate paid would  be higher than the discount rate

2

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?

Answer:

1. The total future cash payments.

Explanation to the above answer

this is the case of restructuring. in restructuring we can see that it involving only a particular change in terms, and total future cash payments is compared with carrying amount so that it can determine whether a gain is to be recognized. so we can say that  given ans.B & C & D  are incorrect answer because the total amount of future cash flows are compared to the carrying amount. and only correct answer is answer A  The total future cash payments.