Lolo Co. owes $150,000 in notes payable plus $12,000 of accrued interest to, the company is having financial difficulty. Prepare the journal entry on Lolo Co. 's books to record the settlement of this debt under the following independent cases: a) To eliminate the debt, the creditor agrees to accept from Lolo Co. land having a fair value of $140,000 and a recorded cost of $145,000. b) To eliminate the debt, the creditor agrees to take an equity interest in Lolo Co. Lolo Co issued 10,000 ordinary shares having a fair value of $14 per share and $5 par value per share. c) To eliminate the debt, the creditor agrees to restructure the debt by issuing a new zero interest bearing note with $170,000 face value for 3 years. The market interest rate of similar notes is 9%.

Lolo Co. owes $150,000 in notes payable plus $12,000 of accrued interest to, the company is having financial difficulty. Prepare the journal entry on Lolo Co. 's books to record the settlement of this debt under the following independent cases: a) To eliminate the debt, the creditor agrees to accept from Lolo Co. land having a fair value of $140,000 and a recorded cost of $145,000. b) To eliminate the debt, the creditor agrees to take an equity interest in Lolo Co. Lolo Co issued 10,000 ordinary shares having a fair value of $14 per share and $5 par value per share. c) To eliminate the debt, the creditor agrees to restructure the debt by issuing a new zero interest bearing note with $170,000 face value for 3 years. The market interest rate of similar notes is 9%.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter4: Income Exclusions

Section: Chapter Questions

Problem 61P

See similar textbooks

Similar questions

Nassau Co. owes Dominion Ltd. $115,000 on a note payable, plus $7,500 interest. Dominion agrees to accept land in full settlement. The land is recorded on the books of Nassau at $55,600 and is currently worth $85,000. Required: Prepare the journal entry to record the debt settlement on the books of Nassau.
(Debtor/Creditor Entries for Settlement of Troubled Debt) Gottlieb Co. owes $199,800 to Ceballos Inc. The debt is a 10-year, 11% note. Because Gottlieb Co. is in financial trouble, Ceballos Inc. agrees to accept some land and cancel the entire debt. The property has a book value of $90,000 and a fair value of $140,000.Instructions(a) Prepare the journal entry on Gottlieb’s books for debt restructure.(b) Prepare the journal entry on Ceballos’s books for debt restructure.
Gottlieb Co. owes $199,800 to Ceballos Inc. The debt is a 10-year, 11% note. Because Gottlieb Co. is in financial trouble, Ceballos Inc. agrees to accept some land and cancel the entire debt. The property has a book value of $90,000 and a fair value of $140,000. Instructions a. Prepare the journal entry on Gottlieb's books for debt restructure. b. Prepare the journal entry on Ceballos's books for debt restructure.
Vaughn Co. owes $181,300 to Bramble Inc. The debt is a 10-year, 11% note. Because Vaughn Co. is in financial trouble, Bramble Inc. agrees to accept some land and cancel the entire debt. The property has a book value of $96,500 and a fair value of $129,600. a. b. Prepare the journal entry on Vaughn's books for debt restructure. Prepare the journal entry on Bramble's books for debt restructure.
Crane, Inc., which owes Windsor Co. $3,280,000 in notes payable, is in financial difficulty. To eliminate the debt, Windsor agrees to accept from Crane land having a fair value of $2,501,000 and a recorded cost of $1,845,000. Prepare the journal entry on Crane's books to record the restructuring of this debt. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Account Titles and Explanation Notes Payable Land Gain on Disposal of Land Gain on Restructuring of Debt Debit 3280000 Credit 1845000 656000 779000
On Jan. 1, 2021, Yumi Co. settled a P 1,000,000 loan payable with an unamortized discount of P 20,000 and accrued interest of P 90,000 by transferring to the lender old equipment with cost of P 3,000,000, accumulated depreciation of P 2,200,000 and fair value of P 900,000. How much gain on extinguishment of debt is to be recognized? a. P 270,000b. P 290,000c. P 250,000d. P 150,000
The Statement of Affairs for Ivan Corporation shows that approximately P0.78 on the peso probably will be paid to unsecured creditors without priority. The corporation owes JICR Company P23,000 on a promissory note, plus accrued interest on P940. Inventories with a current fair value of P19,200 collateralized the note payable. Compute the amount that JICR Company should receive from Ivan Corporation assuming that the actual payments to unsecured creditors without priority consist of 78% of total claims.
Larkspur Co. owes $202,500 to Cullumber Inc. The debt is a 10-year, 11% note. Because Larkspur Co. is in financial trouble, Cullumber Inc. agrees to accept some land and cancel the entire debt. The property has a book value of $92,800 and a fair value of $146,600. (a) Prepare the journal entry on Larkspur’s books for debt restructure. (b) Prepare the journal entry on Cullumber’s books for debt restructure. Please fill in all the boxes displayed in the image- thank you!
Kochi Company showed the following data with respect to a matured obligation: Notes payable 1,100,000 Interest payable 200,000 The company negotiated with the creditor for the settlement of the notes payable. The entity transferred a transportation vehicle with carrying amount of P800,000 and a fair value of P1,100,000. Assume that only the notes payable are to be extinguished, while the accrued interest is paid in cash together with the transportation vehicle. What is the gain (or loss) from the derecognition of liability?
Before any debt cancellation, the insolvent KuhnCo holds business equipment, its only asset, with a fair market value of $1 million and related liabilities of $1.25 million. The lender agrees to cancel $400,000 of the liabilities. KuhnCo has no other liabilities. a. How much gross income does KuhnCo report as a result of the debt cancellation? b. How would your answer change, if at all, had the lender cancelled $200,000 of the debt?
On January 1, 20x1, an entity has an outstanding note payable with carrying amount of P1,000,000. On this date, the debtor agrees to receive equipment with historical cost of P1,800,000, accumulated depreciation of P900,000 and fair value of P850,000 in full settlement of the note payable. Requirement: Compute for the gain or loss on the derecognition of the note payable.
2.) Sisy Company has an outstanding 950,000 note payable to Bro Finance Corporation. Because of financial difficulties, Sisy negotiates with Bro to exchange inventory of machine parts to satisfy the debt. The cost of the machine parts inventory transferred is carried at sisy's books at P 610,000. The estimated sales price of these inventory items is p 835,000. REQUIRED: a.) How much shall be recognize as gain on debt restructuring?