b. Forgave the accrued interest for one year amounting to P12,000.Case 5Brewed entered into two restructuring agreement in 2021, Brewed iscurrently experiencing financial difficulties. The details of the restructuringof its note payable are as follows:Note payable- Café CompanyOn December 31, 2021, Brewed Company entered into a debt restructunngagreement with Café Company. A note for P100,000 and one yeaaccrued interest was due on this date to Café Company. The termisrestructuring are as follows:a. Reduced the principal obligation to P70,000.b. Forgave the accrued interest for one year amounting to P12,00.c. Extend the maturity date to December 31, 2024. Note payable - Affogato CompanyOn December 31, 2021, Brewed Company entered into a debt restructuringd. Reduced the interest rate to 8%.Chapter 3: Audit of Non-Current Liabilitiesagreement with Affogato Company. A note for P200,000 due on this datee. Interest based on the new terms is payable every December 31,I Reduced the interest rate to 8%starting 2022.-aAffogato Company. Interest for current year was paid by Brewed. Theterms of restructuring are as follows:Reduced the principal obligation to P180,000.h Extend the maturity date to December 31, 2023.e Reduced the interest rate from 10% to 9.5%.d. Interest is payable at each year-end starting 2022.Determine the following as a result of your audit:1. How much is the amount of gain (loss) on extinguishment shouldBrewed recognized in 2021?2. How much is the interest expense recognized in the statement ofcomprehensive income for the period ending December 31, 2022?3. How much is the total carrying value of the notes payable reported inits December 31, 2022 statement of financial position?

Restructuring agreement: It is an agreement entered into by the borrowers and the lenders, for…

b. Forgave the accrued interest for one year amounting to P12,000. Case 5 Brewed entered into two restructuring agreement in 2021, Brewed is currently experiencing financial difficulties. The details of the restructuring of its note payable are as follows: Note payable- Café Company On December 31, 2021, Brewed Company entered into a debt restructunng agreement with Café Company. A note for P100,000 and one year accrued interest was due on this date to restructuring are as follows: a. Reduced the principal obligation to P70,000. b. Forgave the accrued interest for one year amounting to P12.00. c. Extend the maturity date to December 31, 2024. Café Company. The terms of

b. Forgave the accrued interest for one year amounting to P12,000. Case 5 Brewed entered into two restructuring agreement in 2021, Brewed is currently experiencing financial difficulties. The details of the restructuring of its note payable are as follows: Note payable- Café Company On December 31, 2021, Brewed Company entered into a debt restructunng agreement with Café Company. A note for P100,000 and one year accrued interest was due on this date to restructuring are as follows: a. Reduced the principal obligation to P70,000. b. Forgave the accrued interest for one year amounting to P12.00. c. Extend the maturity date to December 31, 2024. Café Company. The terms of

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 31E

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Restructuring (Debtor) Oakwood Corporation is delinquent on a 2,400,000, 10% note to Second National Bank that was due January 1, 2019. At that time, Oakwood owed the principal amount plus 34,031.82 of accrued interest. Oakwood enters into a debt restructuring agreement with the bank on January 2, 2019. Required: Prepare the journal entries for Oakwood to record the debt restructuring agreement and all subsequent interest payments assuming the following independent alternatives: 1. The bank extends the repayment date to December 31, 2022, forgives the accrued interest owed, reduces the principal by 200,000, and reduces the interest rate to 8%. 2. The bank extends the repayment date to December 31, 2022, forgives the accrued interest owed, reduces the principal by 200,000, and reduces the interest rate to 1%. 3. The bank accepts 160,000 shares of Oakwoods 55 par value common stock, which is currently selling for 14.50 per share, in full settlement of the debt. 4. The bank accepts land with a fair value of 2,300,000 in full settlement of the debt. The land is being carried on Oakwoods books at a cost of 2,200,000.
On January 1, 2019, Northfield Corporation becomes delinquent on a 100,000, 14% note to First National Bank, on which 16,651 of interest has accrued. On January 2, 2019, the bank agrees to restructure the note. It forgives the accrued interest, extends the repayment date to December 31, 2021, and reduces the interest rate to 10%. Required: Prepare a schedule for Northfield to compute the annual interest expense in regard to the preceding note for each year of the restructuring agreement.
Marmol Corporation uses the allowance method for bad debts. During 2019, Marmol charged 50,000 to bad debt expense and wrote off 45,200 of uncollectible accounts receivable. These transactions resulted in a decrease in working capital of: a. 0 b. 4,800 c. 45,200 d. 50,000
On December 31, 2019, Kale Bank entered into a debt restructuring agreement with Miserable Corp., which was experiencing financial difficulties. A note for P1,000,000 and one year's accrued interest was due on this date from Miserable. The note receivable from Miserable was restructured as follows: reduced the principal obligation to P700,000. forgave the P120,000 of accrued interest for 2019. extended the maturity date to December 31, 2022. reduced the interest rate to 8%. Interest is payable annually on December 31, beginning 2020. How much interest income should Kale Bank report for the year ended December 31, 2020? Group of answer choices Nil P56,000 P64,258 P75,931
On January 1, 2021, Mara Company entered into a debt restructuring agreement with Clara Company which was experiencing financial difficulties. Mara restructured a P1,000,000 note receivable as follows:A.Reduced the principal obligation to P700, 000.B.Forgave P120, 000 of accrued interest.C.Extended the maturity date from January 1, 2021 to December 31, 2022.D.Reduced the interest rate from 12% to 8%. Interest is payable annually on December 31, 2021 and 2022. 1.What is the interest income for 2022? 2.What is the impairment loss on the note receivable for 2021?
Colt Company is indebted to Kent Company under an P8,000,000, 10% 4- year note dated December 31, 2018. The interest of P800,000 was paid on December 31, 2019 and 2020. During 2021, Colt Company experienced financial difficulties and is likely to default unless concessions are made. On December 31, 2021 Kent Company agreed to restructuring the debt as follows: a. Interest of P800,000 for 2021, due December 31, 2021 was made payable December 31, 2022. b. Interest for 2022 was waived. c. The principal amount was reduced to P7,000,000. Required: Prepare the entry record the debt restructuring on the books Colt Company.
3. Gliezel company has an overdue 8% note payable to City Bank at P4,000,000 and recorded accrued interest of P320,000. As a result of a settlement on January 1, 2018, City Bank agreed to the following restructuring arrangement: a. reduced the principal obligation to P3,500,000; b. forgave the P320,000 accrued interest; c. extended the maturity date to December 31, 2019 and d. annual interest of 10% is to be paid on December 31, 2018 and 2019. The present value of 1 at 8% for two periods is 0.8573, and the present value of an ordinary annuity of 1 at 8% for two periods is 1.7833. What amount of gain on extinguishment of debt to be recognized in 2018?
At January 1, 2021, Rothschild Chair Company, Inc., was Indebted to First Lincoln Bank under a $20 million, 10% unsecured note. The note was signed January 1, 2018, and was due December 31, 2024. Annual interest was last pald on December 31, 2019. Rothschild Chair Company was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use approprlate factor(s) from the tables provlded.) Check my work Required: Prepare all journal entries by Rothschild Chair Company, Inc., to record the restructuring and any remaining transactions relating to the debt under each of the independent circumstances below: 1. First Lincoln Bank agreed to settle the debt in exchange for land having a fair value of $16 million but carried on Rothschild Chair Company's books at $13 million. 2. First Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b) reduce the…
At January 1, 2021, Rothschild Chair Company, Inc., was indebted to First Lincoln Bank under a $20 million, 10% unsecured note. The note was signed January 1, 2018, and was due December 31, 2024. Annual interest was last paid on December 31, 2019. Rothschild Chair Company was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Prepare all journal entries by Rothschild Chair Company, Inc., to record the restructuring and any remaining transactions relating to the debt under each of the independent circumstances below: 1. First Lincoln Bank agreed to settle the debt in exchange for land having a fair value of $16 million but carried on Rothschild Chair Company’s books at $13 million. 2. First Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b) reduce the remaining four…
At January 1, 2021, Rothschild Chair Company, Inc., was indebted to First Lincoln Bank under a $39 million, 10% unsecured note. The note was signed January 1, 2018, and was due December 31, 2024. Annual interest was last paid on December 31, 2019. Rothschild Chair Company was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Prepare all journal entries by Rothschild Chair Company, Inc., to record the restructuring and any remaining transactions relating to the debt under each of the independent circumstances below: 1. First Lincoln Bank agreed to settle the debt in exchange for land having a fair value of $35 million but carried on Rothschild Chair Company's books at $30.1 million. 2. First Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b) reduce the remaining four…
On January 1, 2021, Chong Company had an overdue 10% note payable to AprilBank at P8,000,000 with accrued interest of P800,000. The company and the creditor agreed for the following restructuring agreement: 1. Reduced the principal obligation to P7,000,000. 2. Forgave the P700,000 of the accrued interest, and the remainder shall be added to the reduced principal obligation, payable at the end of the term. 3. Extended the maturity date to two years. The interest rate remained the same, payable annually. The market rate of interest is also the same with the nominal rate. What is the gain (or loss) on restructuring to be recognized in the profit or loss? The PV of 1 at 10% for two periods is 0.83, and the PV of an ordinary annuity of 1 at 10% for two periods is 1.74.
At January 1, 2024, Clayton Hoists Incorporated owed Third BancCorp $31 million, under a 10% note due December 31, 2025. Interest was paid last on December 31, 2022. Clayton was experiencing severe financial difficulties and asked Third BancCorp to modify the terms of the debt agreement. After negotiation Third BancCorp agreed to do the following: Note: Use appropriate factor(s) from the tables provided. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) ● Forgive the interest accrued for the year just ended. • Reduce the remaining two years' interest payments to $1 million each. ● Reduce the principal amount to $30 million. Required: 1-3. Prepare the journal entries by Third BancCorp necessitated by the restructuring of the debt at January 1, 2024, December 31, 2024 and December 31, 2025. Note: Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers…