1. What is the gain from extinguishment of debt if the equity swap is measured at the fair value of the shares? 2. What amount should be recognized as share premium if the equity swap is measured at the carrying amount of liability? 3. What is the gain from extinguishment of debt if the equity swap is measured at the fair value of the liability?
Q: On July 1, 2020, an interest date, P1,000,000 of Siomai Company bonds were converted into 20,000 of…
A: Amount to be recognised =Market value of ordinary shares -Carrying amount of bonds
Q: On July 1, 2020, an interest date, P1,000,000 of Siomai Company bonds were converted into 20,000 of…
A: Conversion of bonds refers to the process of exchanging a convertible type of asset or bond into…
Q: Swifty Company purchased, on January 1, 2020, as an available-for-sale security, $90,000 of the 7%,…
A: SOLUTION- JOURNAL ENTRY IS USED TO RECORD A BUSINESS TRANSACTION IN THE ACCOUNTING RECORDS OF A…
Q: On January 1, 2020, Dumaguete Company purchased bonds with face amount of P4,000,000 for P4,206,000.…
A: ANSWER The business model is to hold the asset until redemption, but sales may be made to invest…
Q: On October 1, 2021, POGI Company purchased 4,000 of the P1,000 face amount, 10% bonds of GANDA…
A: Bonds are defined as the units of the corporate debt, which are issued through the companies as well…
Q: anuary 1, 2026 and were purchased for P5,550,000 to yeild 11%. The entity classified the bondss as…
A: Price of bond is the present value of coupon payment and the present value of the par value of the…
Q: Bloom Corporation purchased $1,000,000 of Taylor Company 5% bonds, at their face amount, with the…
A: Definition: Bonds: Bonds are a kind of interest bearing notes payable, usually issued by…
Q: On January 1, 2019, Demeanor Company pure with face amount of P5,000,000 to be held as fir at…
A: The answer has been mentioned below.
Q: On January 1, 2019, Pat Archi Inc purchased marketable equity securities for P2,000,000. The…
A: The question is related to Financial Assets. It is given that the securities do not qualify as…
Q: In its first year of operations, Oriole Corporation purchased available-for-sale debt securities…
A: Fair value of the securities means actual replacement value of the securities in the market.…
Q: An investor company purchased $716,000 of 4% bonds from the investee company on January 1, 2020,…
A: When the corporation buys securities with the intention to resell them or not hold them till…
Q: On January 1, 2021, RANCY Company received ₱107,720 for a ₱100,000 face amount, 12% bond, a price…
A: Semiannual interest payment = face value of bonds x rate of interest x 6/12 = 100000*12%*6/12 =…
Q: On December 31, 2019, after recording interest and amortization, Lyka Company converted P5,000,000…
A: A share premium account occurs in the shareholders' equity portion of the balance sheet. It is also…
Q: On October 1, 2021, POGI company purchased 4000 of the P1000 face amount, 10% bonds of GANDA Company…
A: The carrying value of a bond means the net amount between the bond's face value plus any…
Q: On January 1, 2020, DEF Company purchased equity securities for P18,000,000. The entity paid the…
A: The fair value change on the financial instrument that is measured at FVOCI is an unrealized…
Q: On October 1, 2019, Kite Corporation purchased a debt security having a face value of P3,000,000…
A: Investment in debt securities is the investment in the debenture of the company which is a debt for…
Q: Presented below is selected information related to the financial instruments of Pronghorn Company at…
A: Journal entry to record the fair value for the bonds payable at December 31 2020 is as follows:
Q: On December 31, 2020, Camiguin Company shows the following data with respect to its matured…
A: An equity swap is a trade of future cash flows between two parties that enables each party to…
Q: Presented below are two independent situations: (a)Morten Corporation purchased $480,000 of its…
A: Journal entry is the process of documenting commercial transactions for the first time in the books…
Q: Total gains on the settlement of debt to be recognized in profit or loss:
A: PV of the new note Year Amount PV factor PV of the note 1 300000*5%= 15000 1/(1.1)1=…
Q: On October 1, 2020, Close Corporation purchased a 12% P 3,000,000 face amount bond issue for…
A: Bonds are defined the fixed-income debt instrument that is used to finance the business. It can be…
Q: On 1 January 2020, an entity purchased a debt instrument at its face value of P1,000,000. The…
A: As per IFRS expected credit loss is to be recognized in other comprehensive income section of…
Q: On January 1, 2019, Dumaguete Company purchased bonds with face amount of P4,000,000 for P4,206,000.…
A: Initial recognition of bonds = P4, 206,000 Interest will be paid on face value
Q: On October 1, 2022, Milk Tea Company purchased a debt security having a face value of P3,000,000…
A: In case of investment in debt security is measured at FVTOCI ,initially the investment should…
Q: On December 31, 2021, ABC Co. was indebted to XYZ Street Company on a P2M, 10% note. Only interest…
A: Debt reconstruction When the company faces financial distress and liquidity problem, company will…
Q: On January 1, 2016, Star Company received P107,720 for a P100,000 face amount, 12% bond, a price…
A: One of the source used by the business entities to meet their financial requirements is issue of…
Q: January 1, 20x1, an entity has an outstanding note payable with carrying amount of P1,000,000. On…
A: As per PFRS 9 financial instruments note payable is an financial liability comes with in the scope…
Q: An investor company purchased $491,000 of 8% bonds from the investee company on January 1, 2020,…
A: Particulars Amount Cost of Bond Investment on Jan.1,2020 $755470 Add: Amortization of Discount…
Q: On October 1, 2021, Best Company purchased as debt investments at fair value through profit or loss,…
A:
Q: Gentiles Company is indebted to Israelites under a P1,000,000, 9% three-year bonds dated December…
A: Bonds are one of the type of long-term debt generally issued by companies. The issuer of bonds pays…
Q: On May 1, 2019, LAG Co. purchased a short-term P2,000,000 face value, 9% debt instruments for…
A: Given, Purchases = P 1,860,000 Face Value = P 2,000,000 Fair value = 98%
Q: On October 1, 2019, Alpha Company is interested in the business of Beta Company. Negotiations have…
A: In accordance with PFRS 3 "Business Combinations", acquisition related costs does not form part of…
Q: Ramirez Company has a held-for-collection investment in the 6%, 20-year bonds of Soto Company. The…
A: GAAP - Generally Accepted Accounting Principles refer to a common set of accounting principles,…
Q: On January 1, 2020, the Gim Corporation purchased equity securities for P2,000,000. The company also…
A: The investment in financial securities can be reported as trading security, held to maturity…
Q: S&L Financial buys and sells securities which it classifies as available-for-sale. On December 27,…
A: The unrealized gain on the bond investment is recognized through OCI, and on derecognition of…
Q: On January 1, 2019, Pacita Corp. purchased marketable equity securities to be held for trading…
A: For measurements under FVTOCI the transaction cost will be debited to profit or loss account…
Q: In its first year of operations, Wildhorse Corporation purchased, available-for-sale debt securities…
A: The balance sheet is one of the important financial statements that have to be prepared by the…
Q: On July 1, 2021, PASSETS acquired all the net assets of SIABS at its underlying book value, which…
A: Amount paid for registering the newly issued shares: P150,000 Amount paid for printing of the stock…
Q: On January 1, 2020, Crane Corp. sold at 106, 100 of its $1,000 face value, five-year, 7%…
A: Retractable bond: This is a bond type where the bond holders can demand the issuer to redeem at face…
Q: On December 31, 2021, ABC Co. was indebted to XYZ Street Company on a P2M, 10% note. Only interest…
A: Debt Restructuring Debt structing which was used for the corporate sector to restructure their debts…
Q: On October 1, 2021, Valorant Company purchased a debt security having a face value of P3,000,000…
A: In case of investment in debt security is measured at FVTOCI ,initially the investment should…
Q: The contingent liability is an accrual for possible loss on a P1,000,000 lawsuit filed against the…
A: Answer - Calculation of amount should be reported on December 31, 2020 for current liabilities -…
Q: On October 1, 2021, Neon Company purchased a P2,000,000 face value 10% debt instrument paying a…
A: A profit and loss financial statement that illustrates a company's revenue and spending over a…
Q: On January 1, 2021, RUDOLPH Company received ₱107,720 for a ₱100,000 face amount, 12% bond, a price…
A: Semiannual interest payment = face value of bonds x rate of interest x 6/12 = 100000*12%*6/12 =…
Q: On April 1, year 1, the entity purchased P200,000 face value, 9% Treasury Notes for P198,500,…
A: On April 1 of Year 1, Company purchased face value = P200000 Cost of purchase of 9% of Treasury…
Q: At December 31, 2019, Wayne Company owned note payable of P1,950,000, due March 15, 2020. Wayne…
A: Current liabilities are those liabilities which are due within a year and are to repaid within a…
Q: On July 1, 2021, PASSETS acquired all the net assets of SIABS at its underlying book value, which…
A: Acqusition cost in Business combination Acqusition cost which are incurred at the time of the…
Q: On December 31, 2021, the end of its first year of operations, Blossom Associates owned the…
A: Introduction: The process of documenting or taking note of any financial or nonfinancial action is…
Q: On December 31, 2021, Sunshine Company showed the following data with respect to its matured…
A: A share premium account appears on the balance sheet in the shareholders' equity section. The…
Q: On January 1, 2020, the Gim Corporation purchased equity securities for P2,000,000. The company also…
A: Unrealized Gain / (Loss) = Fair Value - Cost of Investment
On December 31, 2024, Milagros Company showed the following information with respect to a
matured obligation.
Note payable 5,000,000
Accrued interest payable 500,000
The entity is threatened with a court suit if it could not pay the maturing debt. Accordingly,
the entity entered into an agreement with the creditor for the issuance of share capital in full
settlement of the note payable, The agreement provided for the issue of 50,000 ordinary shares
with par value of P50. The ordinary share is currently quoted at P7O. The fair value of the note
payable is P4,000,000.
Step by step
Solved in 3 steps with 3 images
- On January 1, 2019, Brewster Company issued 2,000 of its 5-year, 1,000 face value, 11% bonds dated January 1 at an effective annual interest rate (yield) of 9%. Brewster uses the effective interest method of amortization. On December 31, 2023, Brewster extinguished the 2,000 bonds early through acquisition in the open market for 1,980,000. On July 1, 2022, Brewster issued 5,000 of its 6-year, 1,000 face value, 10% convertible bonds dated July 1 at an effective annual interest rate (yield) of 12%. The bonds are convertible at the option of the investor into Brewsters common stock at a ratio of 10 shares of common stock for each bond. Brewster uses the effective interest method of amortization. On July 1, 2023, an investor in Brewsters convertible bonds tendered 1,500 bonds for conversion into 15,000 shares of Brewsters common stock, which had a market value of 105 per share at the date of the conversion. Required: 1. Using the information about Brewster, answer the following questions: a. Were the 11% bonds issued at par, at a discount, or at a premium? Why? b. Is the amount of interest expense for the 11% bonds using the effective interest method of amortization higher in the first or second year of the life of the bond issue? Why? 2. Using the information about Brewster, explain the following: a. How is a gain or loss on early extinguishment of debt determined? Does the early extinguishment of the 11% bonds result in a gain or loss? Why? b. How does Brewster report the early extinguishment of the 11% bonds on the 2023 income statement? 3. Based on the information provided about Brewster, answer the following questions: a. Does recording the conversion of the 10% convertible bonds into common stock under the book value method affect net income? What is the rationale for the book value method? b. Does recording the conversion of the 10% convertible bonds into common stock under the market value method affect net income? What is the rationale for the market value method?Refer to the information in RE13-5. Assume that on December 31, 2019, the investment in Smith Corporation bonds has a market value of 12,500. Prepare the year-end journal entry to record the unrealized gain or loss.Refer to the information in RE13-5. Assume that on June 30, Aggie received interest on the Smith Corporation bonds. Prepare the June 30 journal entries to record the receipt of the interest. On April 30, 2019, Aggie Corporation purchased Smith Corporation 10%, 5-years bonds with a face value of 12,000 at par plus four months of accrued interest. Prepare the April 30 journal entry to record the purchase of these available-for-sale securities.
- Mills Company had five convertible securities outstanding during all of 2019. It paid the appropriate interest (and amortized any related premium or discount using the straight-line method) and dividends on each security during 2019. Each convertible security is described in the following table. The corporate income tax rate is 30%. Required: 1. Prepare a schedule that lists the impact of the assumed conversion of each convertible security on diluted earnings per share. 2. Prepare a ranking of the order in which the securities would be included in the diluted earnings per share computations.Restructuring (Debtor) Oakwood Corporation is delinquent on a 2,400,000, 10% note to Second National Bank that was due January 1, 2019. At that time, Oakwood owed the principal amount plus 34,031.82 of accrued interest. Oakwood enters into a debt restructuring agreement with the bank on January 2, 2019. Required: Prepare the journal entries for Oakwood to record the debt restructuring agreement and all subsequent interest payments assuming the following independent alternatives: 1. The bank extends the repayment date to December 31, 2022, forgives the accrued interest owed, reduces the principal by 200,000, and reduces the interest rate to 8%. 2. The bank extends the repayment date to December 31, 2022, forgives the accrued interest owed, reduces the principal by 200,000, and reduces the interest rate to 1%. 3. The bank accepts 160,000 shares of Oakwoods 55 par value common stock, which is currently selling for 14.50 per share, in full settlement of the debt. 4. The bank accepts land with a fair value of 2,300,000 in full settlement of the debt. The land is being carried on Oakwoods books at a cost of 2,200,000.Waseca Company had 5 convertible securities outstanding during all of 2019. It paid the appropriate interest (and amortized any related premium or discount using the straight line method) and dividends on each security during 2019. Each of the convertible securities is described in the following table: Additional data: Net income for 2019 totaled 119,460. The weighted average number of common shares outstanding during 2019 was 40,000 shares. No share options or warrants arc outstanding. The effective corporate income tax rate is 30%. Required: 1. Prepare a schedule that lists the impact of the assumed conversion of each convertible security on diluted earnings per share. 2. Prepare a ranking of the order in which each of the convertible securities should be included in diluted earnings per share. 3. Compute basic earnings per share. 4. Compute diluted earnings per share. 5. Indicate the amount(s) of the earnings per share that Waseca would report on its 2019 income statement.
- On January 1, 2020, Dumaguete Company purchased bonds with face amount of P4,000,000 for P4,206,000. The business model of the entity in managing the financial asset is to collect contractual cash flows that are solely payment of principal and interest and also to sell the bonds in the open market. The entity has not elected the fair value option of measuring financial asset. The bonds mature on December 31, 2022 and pay 10% interest annually on December 31 each year with 8% effective yield. The bonds are quoted at 95 on December 31, 2020 and 90 on December 31, 2021. REQUIRED: What amount of unrealized loss should be reported as component of other comprehensive income in 2020? What amount of unrealized loss should be reported as component of other comprehensive income in 2021? What amount of cumulative unrealized loss should be reported in the statement of changes in equity on December 31, 2021?On December 31, 2021, Sunshine Company showed the following data with respect to its matured obligation: Mortgage payable P 4,000,000Accrued interest payable 300,000The entity is threatened with a court suit if it could not pay its maturing debt. Accordingly, the entity entered into an agreement with the creditor for the issuance of share capital in full settlement of the mortgage. The agreement provided for the issue of 35,000 shares with par value of P100. The share is currently quoted at P130 and fair value of the liability is P4,500,000. 1. The amount of share premium to be recognized on the equity swap is: 2. Following IFRIC 19, the gain (loss) on the extinguishment of debt is:On December 31, 2019, after recording interest and amortization, Lyka Company converted P5,000,000 of 12% convertible bonds into 50,000 shares of P50 par value. on the conversion date, the carrying amount of the bonds payable was P6,000,000, the market value of the bonds was P6,500,000, and the share was publicly trading at P150. The entity incurred P100,000 in connection with the conversion. When the bonds were originally issued, the equity component was recorded at P1,500,000. What amount of share premium should be recorded as a result of the conversion?
- On October 1, 2021, Valorant Company purchased a debt security having a face value of P3,000,000 with an interest rate of 10% for P3,200,000 including the accrued interest. A total of P50,000 was incurred and paid by Genshin Company which is in relation to the acquisition of the debt instrument. Valorant Company has a business model for fair value through other comprehensive income. The bonds mature on January 1, 2026 and pay interest semi-annually on January 1 and July 1. On December 31, 2021, the bonds had a market value of P3,400,000. What amount should the investment be initially recorded? A.P3,175,000B.P3,200,000C.P3,250,000D.P3,125,000On January 1, 2020, the Deluxe Corporation purchased equity securities to be held for trading purposes for P2,000,000. The company also paid commission, taxes and other transaction costs amounting to P50,000. The securities had fair values at December 31, 2020 and 2021, respectively; P1,750,000 and P2,100,000. No securities were sold during 2021. What amount of unrealized gain or loss should be reported in the 2021 profit or loss section of the statement of comprehensive income?On April 1, year 1, the entity purchased P200,000 face value, 9% Treasury Notes for P198,500, including accrued interest of P4,500. The notes mature July 1, year 2, and pay interest semi-annually on January 1 and July 1. It uses the straight-line method of amortization and intends to hold the notes to maturity. The entity does not elect the fair value option for recording the securities. In its October 31, year 1 balance sheet, the carrying amount of this investment should be?
