Coastal Manufacturing owes First National Bank a 12% note payable for $200,000 plus $12,000 accrued interest. On March 15, 20X2, Coastal and First National execute an agreement whereby Coastal will pay First National $190,000 immediately to settle the debt in full. Coastal will record this transaction to recognize: a. Neither a gain nor a loss from debt restructuring. b. A debt restructuring gain of $22,000. c. A debt restructuring loss of $22,000. d. A debt restructuring gain of $12,000.
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- On Jan. 1, 2021, Yumi Co. settled a P 1,000,000 loan payable with an unamortized discount of P 20,000 and accrued interest of P 90,000 by transferring to the lender old equipment with cost of P 3,000,000, accumulated depreciation of P 2,200,000 and fair value of P 900,000. How much gain on extinguishment of debt is to be recognized? a. P 270,000b. P 290,000c. P 250,000d. P 150,000Fox Co. purchases land on January 1 of Year 1 and issues a 3-year, $70,000 zero-interest-bearing note as payment. The market rate is 10%, and Fox Co. uses the effective interest method to amortize discounts and premiums. Required Stated Interest = 0% e. Repeat the requirements of parts a, b, and c with the stated interest on the note as 5%. e. (part a: prepare a debt amortization schedule for the note) • Note: Round your answers to the nearest whole dollar. Do not use negative signs with your answers. Date Jan. 1, Year 1 Dec. 31, Year 1 $ Dec. 31, Year 2 Dec. 31, Year 3 Stated Rate = 5% $ Cash 3,500 $ 3,500✔ 3,500 ✓ 10,500 $ Interest Expense Discount Amortization 7,000 * $ 7,000 x 7,000 X 21,000 $ 0x 7,000 x 1,167 X 8,167 Note Payable, Net 50,937 x 0x 0 x 1,167 $ e. (Part b: prepare the entry for issuance of the note in exchange for land on January 1 of Year 1)Lolo Co. owes $150,000 in notes payable plus $12,000 of accrued interest to, the company is having financial difficulty. Prepare the journal entry on Lolo Co. 's books to record the settlement of this debt under the following independent cases: a) To eliminate the debt, the creditor agrees to accept from Lolo Co. land having a fair value of $140,000 and a recorded cost of $145,000. b) To eliminate the debt, the creditor agrees to take an equity interest in Lolo Co. Lolo Co issued 10,000 ordinary shares having a fair value of $14 per share and $5 par value per share. c) To eliminate the debt, the creditor agrees to restructure the debt by issuing a new zero interest bearing note with $170,000 face value for 3 years. The market interest rate of similar notes is 9%.
- ll.3. What is the carrying amount of the modified note payable P500,000. The entity is granted by the creditor in a debt note payable of P5,000,000 and accrued interest payable of On January 1, 2021, Kingdom Company had an crerdue 10% note payable of P5,000,000 and accrued interest payable : restructuring agreement the following concessions: a. Accrued interest of P500,000 is forgiven. b. The new interest rate is 14% payable annually every December 31. c. The new maturity date of the note is December 31, 2024. d. The entity paid P290,000 to the creditor as arrangement fee or modification cost. e. Considering the effect of the modification cost or arrangement fee, the new'effective interest rate is 12%. f. The market rate of interest for similar note is 9%. 9% 10% 12% PV of 1 for 4 periods PV of an ordinary annuity of 1 for 4 periods 0.71 0.68 0.64 3.24 3.17 3.04 1. What amount of loss on modification should be recognized for 2021? 409,000 b. 119,000 291,000 d. а. с. 2. What amount should…13. In 2023, a corporation sells its business in an arm's length transaction for proceeds equal to FMV. At the time of the sale the business has accounts receivable of $123,000. The corporate vendor of the business and the purchaser agree that the realizable value of the receivables is $118,500. In 2022, the vendor had deducted a reserve for doubtful debts of $6,800. Which of the following statements is correct? A. If no joint election is filed under ITA 22, the vendor will have an addition to business income of $2,300. B. If no joint election is filed under ITA 22, the vendor will have an addition to business income of $6,800 and an allowable capital loss of $2,250. C. If a joint election is filed under ITA 22, the vendor will have a business deduction of $2,300. D. If a joint election is filed under ITA 22, the vendor will have a business deduction of $4,500. 14. During the current year, Denos Corporation incurred costs of $45,000 for leasehold improvements to its newly rented…
- On October 1,2021 Steve Company borrowed $500,000 from its parent, Pam Company, at an annual interest rate of 5%, with interest payable semiannually on March 31 and September 30. The note’s principle is due in 5 years. Required; a. What balances appear in the December 31, 2021 trial balances of Pam Company and Steve Company with respect to this intercompany loan? b. What balances should appear on the consolidated financial statements of Pam Company and Steve Company with respect to this intercompany loan? c. Prepare the December 31, 2021 elimination entries needed for this intercompany loan.On January 1, 2018, Primair Corporation loaned Vista Company $300,000 and agreed to guarantee all of Vista’s long-term debt in exchange for (1) decision-making authority over all of Vista’s activities and (2) an annual cash payment of 25 percent of Vista’s revenues. As a result of the agreement, Primair is the primary beneficiary of Vista (a variable interest entity). Primair’s loan to Vista stipulated a 7 percent (market) rate of interest to be paid annually.On January 1, 2018, Primair estimated that the fair value of Vista’s equity shares equaled $150,000 while Vista’s book value was $55,000. Any excess fair over book value at that date was attributed to Vista’s trademark with an indefinite life. Because Primair owns no equity in Vista, all of the acquisition-date excess fair over book value is allocated to the non-controlling interest.Vista paid Primair 25 percent of its 2018 revenues at the end of the year. On December 31, 2018, Primair and Vista submitted the following statements…On December 31, 2010 a company was indebted to Creditor Co. on a P2,000,000 10% note. Only interest had been paid to date. Due to its financial difficulties, the company has negotiated a restructuring of its note payable. The parties agreed that the company would settle the debt on the following terms: settle 1/2 of the note by transferring land with a recorded value of P800,000 and a fair value of P900,000 • settle 1/4 of the note by transferring 200,000 shares of P1 par ordinary shares with a fair market value of P15 per share modify the terms of the remaining 1/4 of the note by reducing the interest rate to 5%, extend the due date 3 years from the date of restructuring and reducing the principal to P300,000. How much was the (1) total gain on extinguishment of debt and (2) carrying amount of the note payable as of December 31, 2021? O P437,306 and P273,963 O P550,006 and P142,494 O P336.306 and P262,694 O P437,306 and P262.694
- Vaughn Co. owes $181,300 to Bramble Inc. The debt is a 10-year, 11% note. Because Vaughn Co. is in financial trouble, Bramble Inc. agrees to accept some land and cancel the entire debt. The property has a book value of $96,500 and a fair value of $129,600. a. b. Prepare the journal entry on Vaughn's books for debt restructure. Prepare the journal entry on Bramble's books for debt restructure.Lang Warehouses borrowed $157,000 from a bank and signed a note requiring 2 annual payments of $85,034 beginning one year from the date of the agreement. (EV of $1, PV of $1. EVA of $1. PVA of $1. ÉVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Determine the interest rate implicit in this agreement. (Do not round intermediate calculations. Round interest rate to 1 decimal place.) Solve for i Present value: Annuity paymentOn January 1, 2020, Dumaguete Company purchased bonds with face amount of P4,000,000 for P4,206,000. The business model of the entity in managing the financial asset is to collect contractual cash flows that are solely payment of principal and interest and also to sell the bonds in the open market. The entity has not elected the fair value option of measuring financial asset. The bonds mature on December 31, 2022 and pay 10% interest annually on December 31 each year with 8% effective yield. The bonds are quoted at 95 on December 31, 2020 and 90 on December 31, 2021. REQUIRED: What amount of unrealized loss should be reported as component of other comprehensive income in 2020? What amount of unrealized loss should be reported as component of other comprehensive income in 2021? What amount of cumulative unrealized loss should be reported in the statement of changes in equity on December 31, 2021?
