On January 1, 2020, Jackie Company issued a note with a face amount of P5,000,000. The note carried an interest rate of 10% payable every yearend for three years. The market rate of interest on similar notes is 12%. Scenario C: Jackie extinguished the note on January 1, 2022 by issuing 150,000 of its own P25 par value shares when its fair value is P28.5. The note is quoted at 101 on the extinguishment date. How much is the Share Premium arising from the debt restructuring assuming the shares are valued at the fair value of the note under Scenario C? How much is the gain or loss on debt restructuring assuming the shares are valued at the carrying amount of the note under Scenario C?

On January 1, 2020, Jackie Company issued a note with a face amount of P5,000,000. The note carried an interest rate of 10% payable every yearend for three years. The market rate of interest on similar notes is 12%. Scenario C: Jackie extinguished the note on January 1, 2022 by issuing 150,000 of its own P25 par value shares when its fair value is P28.5. The note is quoted at 101 on the extinguishment date. How much is the Share Premium arising from the debt restructuring assuming the shares are valued at the fair value of the note under Scenario C? How much is the gain or loss on debt restructuring assuming the shares are valued at the carrying amount of the note under Scenario C?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 3MC: On July 1, 2019, Aldrich Company purchased as an available-for-sale security 200,000 face value, 9%...

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On January 1, 2020, Jonathan Company borrowed P500,000 8% note due in four years. The present value of the note on the date of issuance was P367,500. The entity elected irrevocably the fair value option in measuring the note payable. On December 31, 2020, the fair value of the note is P408,150. 1. What is the carrying amount of the note payable on December 31, 2020? a. 500,000 b. 367,500 c. 408,150 d. 460,000 2. What amount should be reported as interest expense for 2020? a. 40,000 b. 29,400 с. 32,562 d. 20,000 3. What amount of gain from change in fair value of the note payable should be reported for 2020? а. 132,500 b. 172,500 91,850 d. 29,400 с. 4. At what amount should the discount on note payable be presented on December 31, 2020? a. 132,500 b. 103,100 91,850 d. с.
On January 1, 2020, Jonathan Company borrowed P500,000 8% note due in four years. The present value of the note on the date of issuance was P367,500. The entity elected irrevocably the fair value option in measuring the note payable. On December 31, 2020, the fair value of the note is P408,150 What is the carrying amount of the note payable on December 31, 2020? 500,000 367,500 408,150 460,000 What amount should be reported as interest expense for 2020? 40,000 29,400 32,562 20,000 What amount of gain from change in fair value of the note payable should be reported for 2020? 135,500 172,500 91,850 29,400 At what amount should the discount on note payable be presented on December 31, 2020? 132,500 103,100 91,850 0
On January 1, 2025, Shetland Company loans $252,510 to Durham Corporation in exchange for a $300,000 zero-interest-bearing note payable in 2 years. The market rate of interest for a transaction of this nature for Durham is 9%. The present value of 1, 2 years out at 9% is 0.8417. Shetland Company has a calendar year-end and it uses the effective-interest method. Prepare journal entries on 1/1/25 to recognize the loan for Shetland Company
On January 1, 2025, Shetland Company loans $252,510 to Durham Corporation in exchange for a $300,000 zero-interest-bearing note payable in 2 years. The market rate of interest for a transaction of this nature for Durham is 9%. The present value of 1, 2 years out at 9% is 0.8417. Shetland Company has a calendar year-end and it uses the effective-interest method. (a) Prepare journal entries on 1/1/25 to recognize the loan for Shetland Company (b) Prepare the journal entry to recognize interest on 12/31/25 for Shetland Company. (c) Prepare the journal entry to recognize interest on 12/31/26 for Shetland Company. (d) Prepare the journal entry to recognize receipt of payment of the note on 01/01/2027 for Shetland Company.
On January 1, 2022, Cat Corporation sold goods to Rat Company. Rat Company signed a non-interest-bearing note requiring payment of P600,000 annually for seven years. The first paymentwas made on January 1, 2022. The prevailing rate of interest for this type of note at date ofissuance was 10%. PV of an ordinary annuity of 1 at 10% for 6 periods 4.36PV of an ordinary annuity of 1 at 10% for 7 periods 4.871. What is the amount of Sales Revenue credited on January 1, 2022?2. What is the carrying amount of note receivable on December 31, 2022?
Metallgurst AG issued a $100,00 4- year, 105 notes at face value to Bank of Norway on January 1, 2019 and received $100,000 in cash. The note requires annual interest payments each December 31. During 2019 Metallgurst experiences financial difficulties. On January 1, 2020 Metallgurst negotiates a settlement of the note by issuing to the bank 20,000 $1 per Metallgurst ordinary shares. The ordinary shares has a market price of $4.75 per share on the date of the settlement. Prepare Metallgurst’s entries to settle the note
On January 1, 2020, Jackie Company issued a note with a face amount of P5,000,000. The note carried an interest rate of 10% payable every yearend for three years. The market rate of interest on similar notes is 12%. Scenario B: The terms of the note were modified on June 30, 2022. The principal is reduced by P250,000. The accrued interest is forgiven. The annual interest, however, is raised to 12% payable every December 31 and June 30, starting December 31, 2022 until December 31, 2024. How much is the gain or loss from debt restructuring under Scenario B? [Indicate if it is a gain or loss] How much is the carrying amount of the new liability on the date of terms modification under Scenario B?
Riverbed Corporation issued a 5-year, $82,000, zero-interest-bearing note to Brown Company on January 1,2025 , and received cash of $48,663. The implicit interest rate is 11%. Prepare Riverbed's journal entries for (a) the January 1 issuance and (b) the December 31 recognition of interest. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) No. (a)
On January 1, 2020, Jackie Company issued a note with a face amount of P5,000,000. The note carried an interest rate of 10% payable every yearend for three years. The market rate of interest on similar notes is 12%.Scenario A: The terms of the note were modified on June 30, 2022. The principal is reduced by P1,000,000. The accrued interest is forgiven. The annual interest is reduced to 8% payable every December 31 and June 30, starting December 31, 2022 until December 31, 2024.Scenario B: The terms of the note were modified on June 30, 2022. The principal is reduced by P250,000. The accrued interest is forgiven. The annual interest, however, is raised to 12% payable every December 31 and June 30, starting December 31, 2022 until December 31, 2024.Scenario C: Jackie extinguished the note on January 1, 2022 by issuing 150,000 of its own P25 par value shares when its fair value is P28.5. The note is quoted at 101 on the extinguishment date. a. How much is the Share Premium arising from…
On January 1, 2020, Jackie Company issued a note with a face amount of P5,000,000. The note carried an interest rate of 10% payable every yearend for three years. The market rate of interest on similar notes is 12%.Scenario A: The terms of the note were modified on June 30, 2022. The principal is reduced by P1,000,000. The accrued interest is forgiven. The annual interest is reduced to 8% payable every December 31 and June 30, starting December 31, 2022 until December 31, 2024.Scenario B: The terms of the note were modified on June 30, 2022. The principal is reduced by P250,000. The accrued interest is forgiven. The annual interest, however, is raised to 12% payable every December 31 and June 30, starting December 31, 2022 until December 31, 2024.Scenario C: Jackie extinguished the note on January 1, 2022 by issuing 150,000 of its own P25 par value shares when its fair value is P28.5. The note is quoted at 101 on the extinguishment date. How much is the gain or loss from debt…
On January 1, 2020, Jackie Company issued a note with a face amount of P5,000,000. The note carried an interest rate of 10% payable every yearend for three years. The market rate of interest on similar notes is 12%.Scenario A: The terms of the note were modified on June 30, 2022. The principal is reduced by P1,000,000. The accrued interest is forgiven. The annual interest is reduced to 8% payable every December 31 and June 30, starting December 31, 2022 until December 31, 2024.Scenario B: The terms of the note were modified on June 30, 2022. The principal is reduced by P250,000. The accrued interest is forgiven. The annual interest, however, is raised to 12% payable every December 31 and June 30, starting December 31, 2022 until December 31, 2024.Scenario C: Jackie extinguished the note on January 1, 2022 by issuing 150,000 of its own P25 par value shares when its fair value is P28.5. The note is quoted at 101 on the extinguishment date. note: Round off present value factors to four…
On January 1, 2020, Jackie Company issued a note with a face amount of P5,000,000. The note carried an interest rate of 10% payable every yearend for three years. The market rate of interest on similar notes is 12%.Scenario A: The terms of the note were modified on June 30, 2022. The principal is reduced by P1,000,000. The accrued interest is forgiven. The annual interest is reduced to 8% payable every December 31 and June 30, starting December 31, 2022 until December 31, 2024.Scenario B: The terms of the note were modified on June 30, 2022. The principal is reduced by P250,000. The accrued interest is forgiven. The annual interest, however, is raised to 12% payable every December 31 and June 30, starting December 31, 2022 until December 31, 2024.Scenario C: Jackie extinguished the note on January 1, 2022 by issuing 150,000 of its own P25 par value shares when its fair value is P28.5. The note is quoted at 101 on the extinguishment date.Note: (Use 4 decimal for PV if needed)…