Eddy Co. is indebted to Cole under a P400,000, 12%, three-year note dated December 31, 2019. Because of Eddy’s financial difficulties developing in 2021, Eddy owed accrued interest of P48,000 on the note at December 31, 2021. Under a debt settlement, on December 31, 2021, Cole agreed to settle the note and accrued interest for a tract of land having a fair value of P360,000. Eddy’s acquisition cost of the land is P290,000. Ignoring income taxes, on its 2021 income statement Eddy should report gain/loss on the disposal of the asset of a.) P158,000 gain b.) P110,000 gain c.) P70,000 loss d.) P70,000 gain

Eddy Co. is indebted to Cole under a P400,000, 12%, three-year note dated December 31, 2019. Because of Eddy’s financial difficulties developing in 2021, Eddy owed accrued interest of P48,000 on the note at December 31, 2021. Under a debt settlement, on December 31, 2021, Cole agreed to settle the note and accrued interest for a tract of land having a fair value of P360,000. Eddy’s acquisition cost of the land is P290,000. Ignoring income taxes, on its 2021 income statement Eddy should report gain/loss on the disposal of the asset of a.) P158,000 gain b.) P110,000 gain c.) P70,000 loss d.) P70,000 gain

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter16: Accounting Periods And Methods

Section: Chapter Questions

Problem 15DQ

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BROWN Company is indebted to WHITE Company under a ₱4,000,000, 12%, three-year note dated December 31, 2018. Because of financial difficulties developing in 2020, BROWN Company owed accrued interest of ₱480,000 on the note on December 31, 2020. Under a debt restructuring on December 31, 2020, WHITE agreed to settle the note and accrued interest for a tract of land having a fair value of ₱3,380,000. The acquisition cost of the land is ₱2,480,000. What amount of pretax gain on extinguishment should BROWN report as component of income from continuing operations in 2020?
Eddy Co. is indebted to Cole under a P400,000, 12%, three-year note dated December 31, 2019. Because of Eddy’s financial difficulties developing in 2021, Eddy owed accrued interest of P48,000 on the note at December 31, 2021. Under a debt settlement, on December 31, 2021, Cole agreed to settle the note and accrued interest for a tract of land having a fair value of P360,000. Eddy’s acquisition cost of the land is P290,000. Ignoring income taxes, how much gain/loss on debt extinguishment is to be recognized by Eddy Co? P0 P40,000 P88,000 gain P88,000 loss
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