Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 13, Problem 47P
a.
To determine
Explain how this note would be reported in a statement of financial affairs.
b.
To determine
Explain how Company A would record the reorganization.
c.
To determine
Find how much will be collected by various parties.
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In 2X19, Land Corporation acquired land by paying P2,000,000 and signing a note with a face value of
P6,000,000. On the note’s due date, December 31, 2X21, Land owed P480,000 of accrued interest and
P6,000,000 on the note. Land was in financial difficulty and was unable to make any payments. To solve the
problem, Land and the bank agreed to amend the note as follows:
• Extended the maturity to December 31, 2X23.
• The P480,000 interest due on December 31, 2X21 was forgiven.
• Land Corporation would be required to make an annual interest payment of P540,000 every December
31 starting 2X22.
• Transaction cost incurred that is directly related to the debt restructuring was P16,850.
As of December 31, 2X21, the yield rate based on the restructured debt and after considering the amount of
transaction cost is 6.24%.
8. What is the carrying amount of the obligation that should be reported in 2X22 statement of financial
position?
9. Provide the journal entry for debt…
In 2X19, Land Corporation acquired land by paying P2,000,000 and signing a note with a face value of
P6,000,000. On the note’s due date, December 31, 2X21, Land owed P480,000 of accrued interest and
P6,000,000 on the note. Land was in financial difficulty and was unable to make any payments. To solve the
problem, Land and the bank agreed to amend the note as follows:
• Extended the maturity to December 31, 2X23.
• The P480,000 interest due on December 31, 2X21 was forgiven.
• Land Corporation would be required to make an annual interest payment of P540,000 every December
31 starting 2X22.
• Transaction cost incurred that is directly related to the debt restructuring was P16,850.
As of December 31, 2X21, the yield rate based on the restructured debt and after considering the amount of
transaction cost is 6.24%.
5. What type of debt restructuring is being described by the case?
6. What is the total gain from restructuring?
7. What amount should Land Corporation report…
Youth Company is in financial trouble and could not meet maturing installments and interest on its bank loan of P5,000,000. The accrued interest on the loan on this date is P1,000,000. Youth Company and the bank agreed on a “dacion en pago” arrangement. Thus the mortgaged land and building were given by Youth Company as full payment for the loan including accrued interest. The cost of the land is P1,500,000 and the building, P6,000,000 with accumulated depreciation of P1,800,000. The fair value of the land and building is about P5,900,000.
1. What amount of gain (loss) on debt restructuring and gain (loss) on exchange respectively, would be recognized by Youth if the US GAAP is applied?
Chapter 13 Solutions
Advanced Accounting
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