Under a debt restructuring on December 31, 2020, ApexCompany agreed to settle the note and accrued interest forCompany owed accrued interest of P600,000 on the note onaDecember 31, 2020.Under a debt restructuring on December 31, 2020, AneCompany agreed to settle the note and accrued interesta tract of land having a fair value of P4,500,000. Theacquisition cost of the land is P3,600,000.What amount of pretax gain on extinguishment should HullCompany report as component of income from continuingoperations in 2020?2,000,000b.a.1,400,0001,100,000d.с.900,000

This question deals with the concept of debt restructuring. When borrower is unable to pay its debt…

Answered: Company owed accrued interest of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Rothschild Chair Company, Incorporated, was indebted to First Lincoln Bank under a $40 million, 10% unsecured note. The note was signed January 1, 2014, and was due December 31, 2027. Annual interest was last paid on December 31, 2022. At January 1, 2024, Rothschild Chair Company was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. Note: Use appropriate factor(s) from the tables provided. (FV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $.1) Required: Prepare all journal entries by First Lincoln Bank to record the restructuring and any remaining transactions, for current and future years, 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 $36 million but carried on Rothschild Chair Company's books at $33 million. 2. First Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b)…
MSG Corporation issued $100,000 of 3-year, 6% bonds outstanding on December 31, 2020 for $106,000. The bonds pay interest annually and MSG uses straight-line amortization. On May 1, 2021, $10,000 of the bonds were retired at 112. As a result of the retirement, MSG will report: A. a $600 loss. B. a $667 loss. C. a $1,200 loss. D. a $1,200 gain.
On October 1, 2021, Smash Company discounted its own note of P500,000 at 10% for 1 year. In its statement of financial position on December 31, 2021, what is the carrying amount of notes payable to be presented as current liability by Smash Company?
At January 1, 2024, Rothschild Chair Company, Incorporated, was indebted to First Lincoln Bank under a $35 million, 12% unsecured note. The note was signed January 1, 2021, and was due December 31, 2027. Annual interest was last paid on December 31, 2022. Rothschild Chair Company was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. Required: Prepare all journal entries by Rothschild Chair Company, Incorporated, 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 $31 million but carried on Rothschild Chair Company's books at $26.5 million. 2. First Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b) reduce the remaining four interest payments to $1 million each, and (c) reduce the principal to $28.5 million. 3. First Lincoln Bank…
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 yea accrued interest was due on this date to Café Company. The termis 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.
The Company issued a short-term debt of $65,000 on July 1, 2021 for a period of 5 months with a note payable of 14% interest. The company uses the accounting period on a quarterly basis. Required: Prepare the journal entries needed to record the issuance of the debt, recognize interest expense, and pay off the debt as it matures. Note: Include the current method of processing and the excel formula
Lechon Corporation has multiple long-term arrangement containing a debt covenant. As of December 31, 2022, the company disclosed current liabilities of P450,786 in its financial statements. The following notes refer to these six (6) long-term loans each amounting to P75,131:Note 1: The specific requirements in the debt covenant have to be met as at December 31 every year. The loan is due in 3 years. The company breaches the debt covenant before the period end. As a result, the loan becomes payable on demand.Note 2: Same details in note 1, but the loan arrangement stipulates that the entity has a grace period of 3 months to rectify the breach and during which the lender cannot demand immediate repayment.Note 3: Same details in note 1, but the lender agreed not to demand repayment as a consequence of the breach. The company obtains this waiver on December 31 and the waiver is for a period of more than 12 months after the period end. Note 4: Same details in note 3, however the company…
Included in Witt Company’s liability account balance at December 31, 2021 were the following: 14% note payable issued October 1, 2020 maturing September 30, 2022 500,000 16% note payable issued April 1, 2019 maturing April 1, 2022 800,000 Witt’s December 31, 2021 financial statements were issued on March 31, 2022. On January 15, 2022, the entire P800,000 balance of 16% note was refinanced by issuance of a long-term obligation payable in a lump sum. In addition, on March 10, 2022, Witt consummated a noncancelable agreement with the lender to refinance the 14%, P500,000 note on a long-term basis, on readily determinable terms that have not yet been implemented. Both parties are financially capable of honoring the agreement, and there have been no violations of the agreement’s provision. On the December 31, 2021 balance sheet, the amount of the notes payable that Witt should classify as current liability is
Catriona Company disclosed the following information on December 31, 2021: SSS payable P20,000 Notes Payable P40,000 Deferred tax liability P10,000 Notes payable due to bank, 12% interest bearing note payable yearly,issued on August 31, 2021, maturing on August 31, 2022 P1,000,000 Note: In the case of the notes payable due to bank, supposing the entity has the discretion to refinance the obligation for at least 12 months after the given maturity date (not reporting period), as seen in its loan agreement, Compute for the current liabilities as of December 31, 2021
Brite Company provided the following information on December 31, 2021: Accounts payable Note payable. 8% unsecured, due July 1, 2023 Accrued expenses Contingent liability Deferred tax liability Bonds payable. 7%, due December 31, 2022 Premium on bonds payable 550.000 4,000,000 350,000 450,000 250.000 5,000.000 500,000 The contingent liability is an accrual for possible loss on a P1,000,000 lawsuit filed against the entity. The legal counsel expects the suit to be settled in 2022 and has estimated that the entity will be liable for damages in the range of P450,000 to P750,000. The deferred tax liability is not related to an asset for financial reporting and is expected to reverse in 2022. What total amount should be reported as current liabilities on December 31.2021? a. 4,900,000 b. 5.350.000 c. 6.400,000 d. 6.850,000
The Company issued a short-term debt of $65,000 on July 1, 2021 for a period of 5 months with a note payable of 14% interest. The company uses the accounting period on a quarterly basis. Required: Prepare the journal entries needed to record the issuance of the debt, recognize interest expense, and pay off the debt as it matures. Note: Include the current method of processing and the excel formula
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