Question 1: Why would a company want to reduce its bond indebtedness before its bonds reach maturity? Indicate how this can be done and the correct accounting treatment for such a transaction.
a. In a troubled debt situation, why might the creditor grant concessions to the debtor?
b. What type of concessions might a creditor grant the debtor in a troubled debt situation?
c. What is meant by "impairment" of a loan? Under what circumstances should a creditor or debtor recognize an impaired loan?