EQUITY SWAP On Jan 01, 20x1, JECK Co. settled a 1,000,000 loan payable by issuing to the lender 20,000 shares with par value of 50 pesos per share. Case A: Assuming the fair value of the shares are selling at 110 pesos per share on Jan. 01, 20x1. a. How much is the gain or loss on the extinguishment b. Prepare 1 compound journal entry for this transaction. Case B: Assuming the fair value of the shares are not readily determinable. The loan pays an annual interest of 12% at each year end and has a remining term of 3 years. The prevailing market rate for similar debt on Jan 01, 20x1 is 10% a. How much is the gain or loss on the extinguishment b. Prepare 1 compound journal entry for this transaction.
EQUITY SWAP On Jan 01, 20x1, JECK Co. settled a 1,000,000 loan payable by issuing to the lender 20,000 shares with par value of 50 pesos per share. Case A: Assuming the fair value of the shares are selling at 110 pesos per share on Jan. 01, 20x1. a. How much is the gain or loss on the extinguishment b. Prepare 1 compound journal entry for this transaction. Case B: Assuming the fair value of the shares are not readily determinable. The loan pays an annual interest of 12% at each year end and has a remining term of 3 years. The prevailing market rate for similar debt on Jan 01, 20x1 is 10% a. How much is the gain or loss on the extinguishment b. Prepare 1 compound journal entry for this transaction.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:EQUITY SWAP
On Jan 01, 20x1, JECK Co. settled a 1,000,000 loan payable by
issuing to the lender 20,000 shares with par value of 50 pesos
per share.
Case A: Assuming the fair value of the shares are selling at 110
pesos per share on Jan. 01, 20x1.
a. How much is the gain or loss on the extinguishment
b. Prepare 1 compound journal entry for this transaction.
Case B: Assuming the fair value of the shares are not readily
determinable. The loan pays an annual interest of 12% at each
year end and has a remining term of 3 years. The prevailing
market rate for similar debt on Jan 01, 20x1 is 10%
a. How much is the gain or loss on the extinguishment
b. Prepare 1 compound journal entry for this transaction.
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