APA, Inc. has forced into bankruptcy and has begun to liquidate. Unsecured claims will be paid at the rate of 40 cents on the peso. ABC Co. holds a non-interest bearing note receivable from APA in the amount of P100,000, collateralized by machinery with a liquidation value of P25,000. The total amount to be realized by ABC on this note receivable is:

APA, Inc. has forced into bankruptcy and has begun to liquidate. Unsecured claims will be paid at the rate of 40 cents on the peso. ABC Co. holds a non-interest bearing note receivable from APA in the amount of P100,000, collateralized by machinery with a liquidation value of P25,000. The total amount to be realized by ABC on this note receivable is:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On January 1, 2021, Ree Company sold a machine to Say Company. In lieu of cash payment, Say gave Ree a 5-year, P500,000 note. The machinery has a cost of P500,000 and accumulated depreciation as of January 1, 2021 of P150,000. The note is a non-interest bearing note and the prevailing rate of interest for a note of this type is 10%. Required: Answer the following questions: (Round off PV factors to 4 decimal places before multiplying.) 1. Current portion of the notes receivable 2. Non current portion of the notes receivable
Before any debt cancellation, the insolvent KuhnCo holds business equipment, its only asset, with a fair market value of $1 million and related liabilities of $1.25 million. The lender agrees to cancel $400,000 of the liabilities. KuhnCo has no other liabilities. a. How much gross income does KuhnCo report as a result of the debt cancellation? b. How would your answer change, if at all, had the lender cancelled $200,000 of the debt?
Wood Incorporated factored €150,000 of accounts receivable with Engram Factors Inc., Without guarantee. Engram assesses a 2% finance charge of the amount of accounts receivable Retains an amount equal to 6% of accounts receivable for possible adjustments. Prepare the journal entry for Wood Incorporated and Engram Factors to record the factoring of the accounts receivable to Engram.
35.On December 31, 2021, the Trust Finance Company had a P5,000,000 note receivable from Leila Company. The note bears 10% interest. The books reported accrued interest of P500,000 on this date. Because of financial distress being suffered by Leila Company, Trust Finance agreed to the restructuring and modification of the terms of its loan to Burgundy as follows: ·reduction of principal to P3,500,000; ·reduction of interest to 7% payable annually beginning Dec. 31, 2022; ·accrued interest on Dec. 31, 2021 is condoned; and ·principal payment was reset to Dec. 31, 2023. The prevailing market rate of interest for similar obligations on the date of restructuring decreased to 9%. Use present value factors rounded to two decimal places. How much impairment loss should Trust Finance Company record on December 31, 2021 as a result of the restructuring?
Tasa Incorporated after having experienced financial difficulties in 2021, negotiated with a major creditor and arrived at an agreement to restructure a note payable on December 31, 2021. The creditor was owed a principal of P3,600,000 and interest of P400,000 but agreed to accept equipment worth 850,000 and a note receivable from Tasa's customer with carrying amount of P2,700,000. The equipment had an original cost of P900,000 and an accumulated depreciation of 300,000. a.What amount should be recognized as gain from extinguishment of debt on December 31, 2021?
APA Corp. was forced into bankruptcy and is in the process of liquidating assets and paying claims. Unsecured claims will be paid at the rate of forty cents on the peso. ABC holds a P30,000 noninterest-bearing note receivable from APA collateralized by an asset with a book value of P35,000 and a liquidation value of P5,000. The amount to be realized by ABC on this note is
ll.
On December 31 , 2018 Nicholas Co. is in financial difficulty and cannot pay a note due that day . It is a $3,300,000 8% issued at par note, payable to Key Bank. Key Bank agrees to accept from Nicholas equipment that has a fair value of 1,450,000, originally costing $2,400,000, with accumulated depreciation of $1,250,000. Key Bank also extends the maturity date to December 31, 2021, reduces the face amount of the note to $1,250,000, and reduces the interest rate to 6%, with interest payable at the end of each year. a. Nicholas should recognize a gain or loss on the transfer of the equipment of: b. At the end of each of the next three years Nicholas records the $ 75,000 interest paid to Key Bank as a: c. In determining the carrying value of the note at December 31, 2018 Key Bank uses an effective interest rate equal to: d. Key Bank records a loss on restructuring of: e. In recording the loss on restructuring, Key bank:
ABC Company, due to extreme financial difficulties has negotiated a restructuring of its 10%, P10,000,000 note payable due on December 31, 2021. The unpaid interest on the note on such date is P1,000,000. The creditor has agreed to reduce the face value to P8,000,000, forgive the unpaid interest, reduce interest rate to 8% and extend the due date three years from December 31, 2021. The present value of 1 at 10% for three periods is 0.75 and present value of an ordinary annuity of 1 at 10% for three periods is 2.49. What is the gain on extinguishment of debt to be recognized by ABC Company on December 21, 2021?
Lucky company borrowed an amount of money from ZER Finance Co. In return, ZER Finance Co received a $ 200,000, 4 year, 6% note from Lucky. On the date of the transaction, the market rate on interest was 8% for a similar note. Instructions: Calculate the net carrying value of the notes receivable on the books of ZER Finance, at the end of year one assuming that Zer is using effective interest method to amortize discount or premium on note receivable The following information might help you: Present value of a future sum factor, 6%, 4 years= 0.7921 Present value of a future sum factor, 8%, 4 years= 0.7350 Present value of an ordinary annuity factor, 6%, 4 years= 3.5 Present value of an ordinary annuity factor, 8%, 4 years= 3.3 (When writing your answer do not use commas or sign of the dollar. For example, if your answer is $1,500, write it as 1500) Answer:
XYZ Services sells (without recourse) $100,000 of receivables to a bank on 2/1/20. The bank retains 3% of the receivables and they charge a fee equal to 2% of the receivables. What effect (if any) does the sale on 2/1/20 have on the assets, liabilities, and equity of the bank that purchases the receivables
Pharoah Inc. owes Waterway Bank $166,000 plus $16,300 of accrued interest. The debt is a 10-year, 10% note. During 2023, Pharoah's business declined due to a slowing regional economy. On December 31, 2023, the bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $302,000, accumulated depreciation of $185,000, and a fair value of $146,000. The bank plans to dispose of the machine at a cost of $6,000. Both Pharoah and Waterway Bank prepare financial statements in accordance with IFRS 9. (a) Prepare the journal entries for Pharpah and Waterway Bank to record this debt settlement. Assume Waterway Bank had previously recognized an allowance for doubtful accounts for the impairment prior to the settlement. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Date…