Baguio Company is experiencing financial difficulty and is renegotiating debt restructuring with the creditor to relieve its financial stress. The entity has a P5,000,000 note payable to First Bank. The bank is considering two alternatives. 1. Acceptance of land owned by the entity valued at P4,000,000 and carried at its historical cost of P2,800,000. 2. Acceptance of an equity interest in the entity in the form of 40,000 shares with fair value of P120 per share. The share capital has a par value of P100 per share. Required: Prepare journal entry that Baguio Company would make under each alternative.
Baguio Company is experiencing financial difficulty and is renegotiating debt restructuring with the creditor to relieve its financial stress. The entity has a P5,000,000 note payable to First Bank. The bank is considering two alternatives. 1. Acceptance of land owned by the entity valued at P4,000,000 and carried at its historical cost of P2,800,000. 2. Acceptance of an equity interest in the entity in the form of 40,000 shares with fair value of P120 per share. The share capital has a par value of P100 per share. Required: Prepare journal entry that Baguio Company would make under each alternative.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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