Exam 12: Set-Off and Extinguishment of Debt

Lynne and Tom Ltd's statement of financial position is shown below. The above balances include a receivable from Melinda Ltd for an amount of $100,000 and a payable to Melinda Ltd for $50,000. Assuming a right to set-off exists with Melinda Ltd the balances on the statement of financial position of Lynne and Tom Ltd after set-off will be:

Which of the following statements is correct with respect to set-off of assets and liabilities?

Which of the following statements is correct with respect to set-off of assets and liabilities?

The conditions that were required by the former AASB 1014 to be satisfied in order to achieve an insubstance debt defeasance using a trust include:

If the conditions for set off were initially met, and in a later period cease to be met, the debt remaining is to be:

The changes under AASB 132 have removed the need for creditors to be involved in the defeasance process:

Practical Ltd issued $100,000 in 4-year, 6 per cent annual debentures for Theoretical Ltd on 1 July 2002. The market required rate of return on the debentures at the time of issue was 8 per cent. Theoretical Ltd decides to forgive the debt on 1 July 2004. Any premium or discount is amortised straight-line. What is the entry in the books of Theoretical Ltd to record the forgiveness of the debt?