Gentiles Company is indebted to Israelites under a P1,000,000, 9% three-year bonds dated December 31, 2018. Because of Gentiles'financial difficulties developing in 2020, Gentiles owed accrued interest of P90,000 on the bonds at December 31, 2020. Under adebt restructuring on December 31, 2020, Israelites agreed to settle the note and accrued interest by issuing 35,000; P25 par valueordinary shares with P27 market value. On the other hand, the bonds are currently quoted at 98. What amount of gain / (loss) onextinguishment of debt should Gentiles report on December 31, 2020?O none of theseO 20,000O 145,000O 110,000O 55,000QUESTION 2Due to extreme financial difficulties, Melchizedek Company has negotiated a restructuring of its 8% P2,000,000 note payable due onDecember 31, 2020. The unpaid interest on the note on such date is P160,000. The creditor has agreed to reduce the face value toP1,500,000, forgive the unpaid interest, reduce the interest rate to 6% and extend the due date two years from December 31, 2020.The present value of 1 at 6% for two periods is 0.8900The present value of 1 at 8% for two periods is 0.8573The present value of an ordinary annuity of 1 at 6% for two periods is 1.8334The present value of an ordinary annuity of 1 at 8% for two periods is 1.7833Melchizedek Company should report gain on extinguishment of debt in its 2020 income statement atO 553,553O 499,994O 713,553O none of these659,994

Bonds are one of the type of long-term debt generally issued by companies. The issuer of bonds pays…

Gentiles Company is indebted to Israelites under a P1,000,000, 9% three-year bonds dated December 31, 2018. Because of Gentiles' financial difficulties developing in 2020, Gentiles owed accrued interest of P90,000 on the bonds at December 31, 2020. Under a debt restructuring on December 31, 2020, Israelites agreed to settle the note and accrued interest by issuing 35,000; P25 par value ordinary shares with P27 market value. On the other hand, the bonds are currently quoted at 98. What amount of gain / (loss) on extinguishment of debt should Gentiles report on December 31, 2020? O none of these 20,000 O 145,000 O 110,000 O 55,000

Gentiles Company is indebted to Israelites under a P1,000,000, 9% three-year bonds dated December 31, 2018. Because of Gentiles' financial difficulties developing in 2020, Gentiles owed accrued interest of P90,000 on the bonds at December 31, 2020. Under a debt restructuring on December 31, 2020, Israelites agreed to settle the note and accrued interest by issuing 35,000; P25 par value ordinary shares with P27 market value. On the other hand, the bonds are currently quoted at 98. What amount of gain / (loss) on extinguishment of debt should Gentiles report on December 31, 2020? O none of these 20,000 O 145,000 O 110,000 O 55,000

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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