On October 15, 2006, Kam Corp. informed Finn Co. that Kam would be unable to repay its $100,000 note due on October 31 to Finn. Finn agreed to accept title to Kam’s computer equipment in full settlement of the note. The equipment’s carrying value was $80,000 and its fair value was $75,000. Kam’s tax rate is 30%. What amounts should Kam report as the gain (loss) on the transfer of assets, and the gain on restructuring of debt?
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|
Transfer gain (loss) |
Restructuring gain |
|
|
a. |
$(5,000) |
$25,000 |
|
b. |
$0 |
$30,000 |
|
c. |
$0 |
$20,000 |
|
d. |
$20,000 |
$0 |