Unsecured creditors: have rights to be paid amounts owed, but the rights may have to be enforced through the courts face significant risk, and accordingly unsecured credit is very unusual have no rights in the event that the debtor defaults
Q: (a) In a troubled-debt situation, why might the creditorgrant concessions to the debtor?(b) What…
A: (a)The creditor mostly grants the borrower with certain concessions with regard to the settlement.…
Q: Why are creditors willing to negotiate with you? It's fun. They lose more by negotiating with you…
A: Debt settlement and bankruptcy are the direct methods to get from the situation of out of debt and…
Q: Which of the following does not relate to credit risks? Select one: A. Credit risk is the…
A: Before answering the question, we should understand what Credit Risk means Credit Risk: It is the…
Q: As a result of the recent mortgage crisis, many banks reported record losses to their mortgage…
A: 1.
Q: The following factor does not contribute to fraudulent activity? Select one: O a. Bad debt expense O…
A: Factors does contribute to fraudulent activity are given below: 1. Opportunity 2. Financial…
Q: Which of the following statements is incorrect? A bank providing a loan to the entity is not a…
A: D) An entity needs to disclose if it has a common director with another entity because there might…
Q: Which of the following is true of an unsecured loan? A. They are exclusively for cars, houses, and…
A: Loan can be defined as money that somebody lends other person in exchange of some interest that is…
Q: What type of concessions might a creditor grant the debtor in a troubled-debt situation?
A: Debt is the amount owed by the company for a particular period from the date of the company's…
Q: What is meant by “accounting symmetry” between the entries recorded by the debtor and creditor in a…
A: Accounting summary:
Q: Which of the following losses can be considered as operational risk losses? a) A counterparty going…
A: Operational risk is defined by the Bank for International Settlements (BIS) as the risk of loss…
Q: Commercial loan agreements should contain which of the following: a. representations b. fees and…
A: A commercial loan agreement is an agreement between the borrower and the lender. The lender provides…
Q: Which of the following statements is correct? (1) Bad debts written off is subject to VAT. (2) Bad…
A: The question is multiple choice question Required Choose the Correct Option
Q: According to critics, what are some problems with the bankruptcysystem?
A: When a company is unable to meet its current obligations as it became incapable financially or if a…
Q: Regarding accounting for troubled debt, the three statements that are not true are the following...…
A: Troubled debt restructuring refers to that debt restructuring when a creditor takes into…
Q: what is the job of a financial intermediary*? What might happen if they fail to do their job? *as…
A: A financial intermediary is an institution that serves as a middleman in a financial transaction…
Q: If a firm does not provide for accrued liabilities, what problems may thefirm face?
A: Assuming this is the case, at that point. The Organization has not gotten the accrued liabilities.…
Q: In negotiating and effecting a troubled debt restructuring, the creditor usually incurs various…
A: 1. The relevant authoritative literature on the accounting treatment of legal fees incurred by a…
Q: Assuming the borrower is in no danger of default, under what conditions might a lender be willing to…
A: There can be majorly two possibilities under which a lender may accept a lesser amount than that of…
Q: Geddes Ltd. Is not able to pay its debts when required, but it wants to prevent bankruptcy and…
A: Disclaimer: There are three questions, but we are allowed to answer only one question at a time. So,…
Q: A troubled debt restructuring is a situation in which * O the debtor has clearly demonstrated an…
A: Troubled debt restructuring represents the situation where the debtor is facing economic…
Q: The understatement of debt, whether due to error or fraud, is considered to be a major potential…
A: Understatement of debt: This occurs when an entity fails to completely disclose the debt it owes to…
Q: Explain the methods of estimating bad debts ?
A: Bad Debt: A loan or outstanding sum that is no longer considered collectable and must be wiped off…
Q: List two types of restrictions long-term creditors often put oncompanies when granting them a loan.…
A: External confirmation External confirmation can be defined as a substantive audit procedure used by…
Q: Sell-Soft is the defendant in numerous lawsuits claiming unfair trade practices. Sell- Soft has…
A:
Q: .Which is correct about covenants? a. Covenants are written promises of the issuer that is…
A: Covenants:-In Finance and legal terminology; a pledge is a guarantee in an arrangement, or some…
Q: properly defaults and is under liquidation, can the creditors of the bank touch and receive the…
A: Answer: Concept: When the liquidation occurs in bank, there is preferential payment that are to be…
Q: Collateral is a valuable asset that is pledged to ensure loan payments. If you fail to repay the…
A: In mortgage loans, collateral is an asset or security used to take loan.
Q: If someone owes you money, that person or business goes into bankruptcy why would it make a…
A: Introduction:- Bankruptcy is a legal process that involves a person or company that is unable to pay…
Q: What tools are available for solving adverse selection and moral hazard problems in debt contracts…
A: There may arise various problems like adverse selection and moral hazards problem in equity and debt…
Q: Which of the following is NOT a client protection principle? a. Methods that prevent client of…
A: Clients protection principles are very important in financial and loans.
Q: Identify the key areas of concern if the company fell on hard times and their creditors forced them…
A: Creditors are the parties or the person to whom company has the liability to pay the money to them…
Q: Loan covenants are used for which of the following reasons?a. To protect the lender from the…
A:
Q: What are the general rules for measuring gain or loss byboth creditor and debtor in a troubled-debt…
A: Rules for measuring gain or loss by creditor in a troubled-debt restructuring involving a…
Q: Explain the 5 C’s that creditors look for in borrowers. Which ones are the most important? Which…
A: A borrower is an individual or an institution that borrows money or loan from the lender for a…
Q: hich one of the following is an indirect cost of bankruptcy? The fees that creditors…
A: Bankruptcy is situation where company is unable pay the payments of creditors and debtor.
Q: rs and regulators are reminding firms to look closely at their accounts payable to be sure they…
A:
Q: What is the main purpose of loan loss provisioning? Explain the concepts of incurred loss model and…
A: The loan loss provision is the cash reserve created by the banks for the future credit risk. The…
Q: In a troubled-debt situation, why might the creditor grant concessions to the debtor?
A: Creditor: Creditor is a person or a company who has provided fund or loan, and hence, have a claim…
Q: Which of the following is an example of faithful representation? A Showing lease payments as a…
A:
Q: Which of the following does not relate to credit risks? a. Credit risk is the possibility of losing…
A: First of all we need to understand the meaning of Credit risk- Credit risk is the probability of…
Q: The auditor must mail cash confirmations, but the client may mail long-term debt confirmations. True…
A: Confirmation Letter: It is a letter sent by an external auditor to the suppliers/financial…
Please explain in detail.
.
Unsecured creditors:
have rights to be paid amounts owed, but the rights may have to be enforced through the courts
face significant risk, and accordingly unsecured credit is very unusual
have no rights in the event that the debtor defaults
only have the recourse of severing business ties with the defaulting debtor
Step by step
Solved in 2 steps
- (a) In a troubled-debt situation, why might the creditorgrant concessions to the debtor?(b) What type of concessions might a creditor grant thedebtor in a troubled-debt situation?In your own opinion, what would be the out come or consequences if a debtor failed to settle thier account?In your own opinion what would be the outcome or consequences if a debtor failed to settle thier account?
- 1. Loans that are to be securitized are passed on to ____ _ _ _ _ _ ___. This helps ensure that if the lender goes bankrupt , it does not affect the credit status of the pooled loans . A. the originator B. a special - purpose entity C. the trustee D. a servicer E. the credit enhanceIn a troubled-debt situation, why might the creditor grant concessions to the debtor?Do some states allow creditors to engage in deception with the debtor to obtain the collateral if there has been a default? (Yes/No, deception is never allowed to be used by a creditor) Is a secured party allowed to be paid (reimbursed) for the costs of collection before it applies funds collected to the unpaid balance of a loan? (Yes/No collected funds must first be used to - pay off the debt owed to the creditor) If a debtor files for bankruptcy, does that stop any and all collection efforts of a creditor? ______ (Yes to unsecured creditors but no for secured creditors / Yes to all creditors, both secured and unsecured / No, bankruptcy does not affect a creditor's right to collection of an unpaid debt)
- Suppose the obligation of the debtor is to do something and he fails to do it or performs it in contravention of the agreement, what are the the remedies available to the creditor?Which of the following does not relate to credit risks? a. Credit risk is the possibility of losing a lender takes on due to the possibility of a borrower not paying back a loan b. It refers to the risk that a lender may not receive the owed principal and interest c. Credit risk also describes the risk that an insurance company will be able to pay a claim. d. Credit risk is the possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations e. Credit risk describes the risk that a bond issuer may fail to make payment when requestedWhich of the following statements is incorrect? A A bank providing a loan to the entity is not a related party transaction. An entity should neither accrue nor disclose when it cosigned a mortgage note on the home of its president B guaranteeing the indebtedness in the event that the president should default. The entity considers the likelihood to default to be remote. Post-employment benefit is part of the compensation of key management personnel. An entity is not required to disclose if it has a common director with another entity.
- Which of the following does not relate to credit risks? Select one: A. Credit risk is the possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations B. Credit risk also describes the risk that an insurance company will be able to pay a claim. C. It refers to the risk that a lender may not receive the owed principal and interest D. Credit risk describes the risk that a bond issuer may fail to make payment when requested E. Credit risk is the possibility of losing a lender takes on due to the possibility of a borrower not paying back a loan40. When an entity breaches an undertaking under a long-term loan agreement on or before the balance sheet date with the effect that the liability becomes payable on demand, (choose the incorrect statement) a. The liability is classified as non-current, even if the lender has agreed, after the balance sheet date and before the authorization of the financial statements for issue, not to demand payment as a consequence of the breach b. The liability is classified as current because, at the balance sheet date, the entity does not have an unconditional right to defer its settlement for at least twelve months after that date. c. The liability is normally classified as current; however, the liability is classified as non-current if the lender agreed by the balance sheet date to provide a period of grace ending at least twelve months after the balance sheet date, within which the entity can rectify the breach and during which the lender cannot demand immediate repayment. d. The…Loan covenants are used for which of the following reasons?a. To protect the lender from the borrower’s substantially weakening of the latter’s financial position.b. To protect the borrower from the lender’s calling the loan early.c. To protect the auditors from false information by the borrower.d. To protect shareholders from management taking on too much debt.
