Gain on extinguishment of 3-year 10% P1 million mortgage note to be recognized in profit or loss in 2022. Gain on settlement of 2-year 12% P500,000 collateral note by issuing ordinary shares to be recognized in profit or loss in 2022. Total gains on extinguishment of debt to be recognized in profit or loss in 2022? Interest expense in 2023. Carrying amount of the note payable as of December 31, 2023?
Hope Company is experiencing financial difficulties due to the impact of the Pandemic on its business. In recent years, the company was forced to scale down its business operations and retrench a significant part of its work force. Also, it negotiated restructuring some of its borrowings with its creditors.
The company was not able to pay the creditor as of 12/31/2022 and arranged restructuring with its creditors with the details as follows as of December 31, 2022:
|
Date |
Principal & Terms |
Status |
Mode of settlement |
|
1/1/2020 |
3-year, 1,000,000 mortgage note. 10% interest, payable annually. |
Due immediately; only interest has been paid to date. |
Transfer the land used as security to the creditor. Cost of land P900,000, fair value P1.5 million |
|
1/1/2021 |
2-year, 500,000 note. Ordinary shares of entity held as collateral. 12% interest, payable annually. |
Due immediately; Principal and interest for 2022 unpaid as of 12/31/22. |
Transfer 50,000 shares, P5 par, fair value is P9 per share. |
|
1/1/2022 |
1-year, 500,000 unsecured note. 15% interest payable annually. |
Due immediately, only interest has been paid to date. |
Modify the terms of the note. Principal reduced to P350,000. Interest reduced to 10%. Due date extended to 12/31/25. |
Based on the given information and the result of your audit, determine the following:
- Gain on extinguishment of 3-year 10% P1 million mortgage note to be recognized in profit or loss in 2022.
- Gain on settlement of 2-year 12% P500,000 collateral note by issuing ordinary shares to be recognized in profit or loss in 2022.
- Total gains on extinguishment of debt to be recognized in profit or loss in 2022?
- Interest expense in 2023.
- Carrying amount of the note payable as of December 31, 2023?
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