Milton Is Experiencing Cash Flow Problems During the Current Year

Milton is experiencing cash flow problems during the current year. He owes $12,000 on his credit card. The credit card company agrees to reduce the debt to $9,000. Prior to the debt reduction, Milton's total assets were $40,000 and his total liabilities were $39,000. How much income must Milton recognize from the reduction of his credit card balance?

A) - 0 -
B) $1,000
C) $2,000
D) $3,000

Correct Answer:

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