B is corrent. A debtor that issues or otherwise grants an equity interest to a creditor to settle fully a payable shall account for the equity interest at its fair value. The gain should be recorded as the excess of the carrying amount of the debt over the fair value of the equity interest granted, in this case $3,000 ($28,000 - $25,000). Note that the fact that Wood Corp. is a debtor in possession under Chapter 11 of the Federal Bankruptcy Code does not affect the answer.
A is incorrect. A debtor that issues or otherwise grants an equity interest to a creditor to settle fully a payable shall account for the equity interest at its fair value. The gain should be recorded as the excess of the carrying amount of the debt over the fair value of the equity interest granted, in this case $3,000 ($28,000 - $25,000). Note that the fact that Wood Corp. is a debtor in possession under Chapter 11 of the Federal Bankruptcy Code does not affect the answer.
A is incorrect. A debtor that issues or otherwise grants an equity interest to a creditor to settle fully a payable shall account for the equity interest at its fair value. The gain should be recorded as the excess of the carrying amount of the debt over the fair value of the equity interest granted, in this case $3,000 ($28,000 - $25,000). Note that the fact that Wood Corp. is a debtor in possession under Chapter 11 of the Federal Bankruptcy Code does not affect the answer.
D is incorrect. A debtor that issues or otherwise grants an equity interest to a creditor to settle fully a payable shall account for the equity interest at its fair value. The gain should be recorded as the excess of the carrying amount of the debt over the fair value of the equity interest granted, in this case $3,000 ($28,000 - $25,000). Note that the fact that Wood Corp. is a debtor in possession under Chapter 11 of the Federal Bankruptcy Code does not affect the answer.
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