19. On December 31, 2012, Guimary Corporation is experiencing extreme financial pressure and is in default in meeting interest payment in its long-term note of P6,000,000 due on December 31, 2013. The interest rate is 10% payable every December 31. In an agreement with the creditor, Guimary Corporation obtained the changes in the terms of the note as shown in the image. At the time of restructuring, the stated rate of interest of the original obligation prevailed in the market for similar notes. What is Guimary Corporation's gain on debt restructuring? * The accrued interest of P600,000 on December 31, 2012 is forgiven. • The principal is reduced by P1,000,000. • The new interest rate is 12%. • The new date of maturity is December 31, 2017. a. P1,979,180 b. P1,600,000 c. P1,221,020 d. PO

19. On December 31, 2012, Guimary Corporation is experiencing extreme financial pressure and is in default in meeting interest payment in its long-term note of P6,000,000 due on December 31, 2013. The interest rate is 10% payable every December 31. In an agreement with the creditor, Guimary Corporation obtained the changes in the terms of the note as shown in the image. At the time of restructuring, the stated rate of interest of the original obligation prevailed in the market for similar notes. What is Guimary Corporation's gain on debt restructuring? * The accrued interest of P600,000 on December 31, 2012 is forgiven. • The principal is reduced by P1,000,000. • The new interest rate is 12%. • The new date of maturity is December 31, 2017. a. P1,979,180 b. P1,600,000 c. P1,221,020 d. PO

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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29. On January 1, 20x1, ABC Bank extended a P1,000,000 loan to XYZ. Principal is due on December 31, 20x5 but 10% interest is due annually starting December 31, 20x1. On December 31, 20x3, XYZ was delinquent and it was ascertained that the loan is credit-impaired. ABC assessed that interests accruing on the loan will not be collected however the principal is expected to be collected in two equal annual installments starting December 31, 20x4. The current rate on December 31, 20x3 is 14%. Impairment loss is (use 6-decimal present value factor) The correct answer is: 232,231
2. On December 31, 2012, Greendale Corporation is experiencing extreme financial pressure and is in default in meeting interest payments on its long-term note of P6,000,000 due on December 31, 2013. The interest rate is 10% payable every December 31. In an agreement with the creditor, Greendale Corporation obtained certain changes in the terms of the note as listed in the image below. What is Greendale Corporation's gain on debt restructuring? (Round off present value factors to four decimal places) • The accrued interest of P600,000 on December 31, 2012 is forgiven. • The principal is reduced by P1,000,000. • The new interest rate is 12%. • The new date of maturity is December 31, 2017. At the time of restructuring, the stated rate of interest of the original obligation prevailed in the market for similar notes. a. P 1,979,180 O b. P 1,600,000 O c. P 1,221,020 BO d. PO
am. 113.
Blue Cells Can contain On December 31, 2017, Short Co. is in financial difficulty and cannot pay a note due that day. It is a $2,000,000 face value note with $200,000 accrued interest payable to Bryan, Inc. The original market rate of interest on the note was 12.58613%. Bryan agrees to forgive the accrued interest, extend the maturity date (two years) to December 31, 2019, and reduce the interest rate to 4%. The present value of the restructured cash flows is $1,712,000 (using the original market rate). Do NOT add rows to the spreadsheet! Discount Cash Premium Interest payable Par Interest expense Discount on bond payable Yes Bonds payable No Loss on redemption Gain on redemptin Cash Interest payable Interest receivable Notes payable Gain on restructuring Loss on restructuring Discount on Note payable Premium on Note payable…
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2. BaBa Black Sheep (BBS) Company loaned HowlHow de Carabao (HDC) Company P7,500,00X) on January 1, 2012. The terms of the loan were payment in full on January 1, 2016 plus annual interest payment at 11%. The interest payment was made as scheduled on January 1, 2013. However, due to financial setbacks, 1IDC Company was unable to make the 2014 interest payments. BRS Company considered the loan impaired and projected the cash fows from the loan on December 31, 2014. The bank accrued the interest on December 31, 2013, but did not continue to accrue interest for 2014 due to impairment of the loan. The projected cush flows are: Amount projected on December 31, 2014 Date of cash Now December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2018 1,0,(XX) 2,000,00X) 4,000,000 The PV of I at 11% is 0,90 for one period; 0.81 for two perionds: 0.73 for three periods: and 0,66 for four periods. Required: a. What is the loan impairment loss on December 31, 2013? b. What is the interest…
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Down Company has an overdue Notes Payable to City Bank of P8,000,000 and recorded accrued interest of P640,000 based on 8% interest rate. This rate of interest is presumed to be the market rate at the time of debt restructuring. As a result of a settlement on December 31, 2012, City Bank agreed to these restructuring arrangements: reduce the principal obligation to P6,000,000; forgive the P640,000 accrued interest; extend the maturity date to December 31, 2014; and annual interest of 10% is to be paid on December 31, 2013 and 2014.What is Down Company’s gain on debt restructuring? (Round off present value factors to four decimal places) a. P 2,640,000 b. P 2,426,220 c. P 1,440,000 d. P 0
(Refinancing of Short-Term Debt) On December 31, 2017, Kate Holmes Company has $7,000,000 of short-term debt in the form of notes payable to Gotham State Bank due in 2018. On January 28, 2018, Holmes enters into a refinancing agreement with Gotham that will permit it to borrow up to 60% of the gross amount of its accounts receivable. Receivables areexpected to range between a low of $6,000,000 in May to a high of $8,000,000 in October during the year 2018. The interest cost of the maturing short-term debt is 15%, and the new agreement calls for a fluctuating interest at 1% above the prime rate on notes due in 2022. Holmes’s December 31, 2017, balance sheet is issued on February 15, 2018.InstructionsPrepare a partial balance sheet for Holmes at December 31, 2017, showing how its $7,000,000 of short-term debt should be presented, including footnote disclosure.