A company is experiencing financial difficulty and is negotiating a trouble debt restructuring with its creditors for its P6,000,000 note payable. The bank accepted an equity interest from the company in a form of 200,000 ordinary shares. The fair value of ordinary shares is P24 per share while the par value of the ordinary shares is P20 per share. What is the amount of gain on debt restructuring to be reported by the company in its profit or loss?

A company is experiencing financial difficulty and is negotiating a trouble debt restructuring with its creditors for its P6,000,000 note payable. The bank accepted an equity interest from the company in a form of 200,000 ordinary shares. The fair value of ordinary shares is P24 per share while the par value of the ordinary shares is P20 per share. What is the amount of gain on debt restructuring to be reported by the company in its profit or loss?

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter24: Bankruptcy, Reorganization, And Liquidation

Section: Chapter Questions

Problem 1P: Southwestern Wear Inc. has the following balance sheet: The trustees costs total 281,250, and the...

See similar textbooks

Similar questions

21. Seal Company is experiencing financial difficulty and is negotiating debt restructuring with its creditor to relieve its financial stress. Seal has a P2,500,00 note payable to United Bank. The bank accepted an equity interest in Seal Company in the form of 200,000 ordinary shares quoted at P12 per share. The par value is P10 per share. The fair value of the note payable on the date of restructuring is P2,200,000. What amount should be recognized as gain from debt extinguishment as a result of the "equity swap"? * a. 400,000 b. 100,000 c. 500,000 d. 200,000
4. Baguio Company is experiencing financial difficulty and is negotiating debt restructuring with its creditor to relieve its financial stress. Baguio company has a P2,000,000 note payable to First Bank. The bank is considering two alternatives. 1. Acceptance of land owned by Baguio company valued at P1,600,000 and carried at its historical cost of P1,120,000. 2. Acceptance of an equity interest in Baguio company in the form of 16,000 shares with fair value of P120 per share. The share capital has a par value of P100 per share. Under the first alternative, what is the amount of gain/(loss) on extinguishment of debt?
Swindle Company is experiencing financial difficulty and is negotiating debt restructuring with its creditor to relieve its financial stress. Swindle has a $3,500,000 bank loan payable with Love Bank. The bank accepted an equity interest in Swindle Company in the form of 300,000 ordinary shares quoted at $12 per share. The par value is $10 per share. The fair value of the bank loan payable on the date of restructuring is $3,200,000. What amount should be recognized as gain from debt extinguishment as a result of the equity swap?
9) The Morrit Corporation has $450,000 of debt outstanding, and it pays an interest rate of 9% annually. Morrit's annual sales are $3 million, its average tax rate is 25%, and its net profit margin on sales is 5%. If the company does not maintain a TIE ratio of at least 3 to 1, then its bank will refuse to renew the loan, and bankruptcy will result. What is Morrit's TIE ratio? Do not round intermediate calculations. Round your answer to two decimal places. 10) What is the future value of a 6%, 5-year ordinary annuity that pays $350 each year? Do not round intermediate calculations. Round your answer to the nearest cent. $ If this were an annuity due, what would its future value be? Do not round intermediate calculations. Round your answer to the nearest cent. $
Southwestern Wear Inc. has the following balance sheet: The trustees costs total 281,250, and the firm has no accrued taxes or wages. The debentures are subordinated only to the notes payable. If the firm goes bankrupt and liquidates, how much will each class of investors receive if a total of 2.5 million is received from sale of the assets?
Do not give solution in image
7.
Baghiben
D4)
GHIJ Corporation is experiencing financial difficulties and a downward trend in its results of operations. The firm is unable to service its debt and as a result, has missed payment of an annual interest on its loan from CVB Company. The principal amount of the loan is P 5,000,000 (which is already due ) with annual interest of 10% payable annually. GHIJ Corporation’s management has negotiated a modification of its debt terms with its creditors. The creditors agree to the following new terms (assume that at this time, the prevailing market rate of interest remained at 11%): • Forgive all accrued interest. • Reduce the principal amount of the loan to P 4,000,000. • Extend the payment of principal for 3 years. • Reduce the interest rate for the remaining 3 years to 8% How much is the gain on debt restructuring?
Bird Enterprises has no debt. Its current total value is $50.8 million. Assume debt proceeds are used to repurchase equity. a. Ignoring taxes, what will the company's value be if it sells $20.3 million in debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, round your answer to the nearest whole number, e.g., 1,234,567.) b. Suppose now that the company's tax rate is 24 percent. What will its overall value be if it sells $20.3 million in debt? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) a. Value of the firm b. Value of the firm
i need typing answer