a voluntary settlement, one group of creditors having claims of $1,000,000 will be immediately paid 95 cents on a dollar. The remainder of the creditors will postpone payment an additional 60 days. This is an example of ________. A) a composition B) a combination of a composition and extension C) an extension D) a liquidation
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In a voluntary settlement, one group of creditors having claims of $1,000,000 will be immediately paid 95 cents on a dollar. The remainder of the creditors will postpone payment an additional 60 days. This is an example of ________.
- A) a composition
- B) a combination of a composition and extension
- C) an extension
- D) a liquidation
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- During 2019, Maricar Company guaranteed a supplier’s P5,000,000 loan from a bank. On October 1, 2020. Maricar was notified that the supplier had defaulted on the loan and filed for bankruptcy protection. The counsel believes Maricar will probably have to pay between P2,500,000 and P4,500,000 under its guaranty. As a result of the supplier’s bankruptcy, Maricar entered into a contract in December 2020, to retool its machines so that Maricar could accept parts from other suppliers. Retooling costs are estimated to be P3,000,000. What amount should Maricar report as a liability in its December 31, 2020 balance sheet? Group of answer choices A.) 4,500,000 B.) 5,000,000 C.) 5,500,000 D. ) 2,500,000Due to extreme financial difficulties, an entity negotiated a restructuring of 10%, P5,000,000 note payable due on December 31, 2X18. The unpaid interest on the note on such date is P500,000. The creditor agreed to reduce the face amount to P4,000,000, forgive the unpaid interest, reduce the interest rate to 8%, and extend the due date three (3) years from December 31, 2X18. The present value of 1 at 10% for three (3) periods is 0.75 and the present value of an ordinary annuity of 1 at 10% for three (3) periods is 2.49. Using the given information, answers the following items: What is the discount or premium on the new note payable on December 31, 2X18? What amount should be reported as interest expense for 2X19? What is the carrying amount of note payable on December 31, 2X19?Due to extreme financial difficulties, an entity negotiated a restructuring of 10%, P5,000,000 note payable due on December 31, 2X18. The unpaid interest on the note on such date is P500,000. The creditor agreed to reduce the face amount to P4,000,000, forgive the unpaid interest, reduce the interest rate to 8%, and extend the due date three (3) years from December 31, 2X18. The present value of 1 at 10% for three (3) periods is 0.75 and the present value of an ordinary annuity of 1 at 10% for three (3) periods is 2.49. Using the given information, answers the following items: Under IFRS 9 Financial Instruments, what is the gain on extinguishment for 2X18? What is the discount or premium on the new note payable on December 31, 2X18? What amount should be reported as interest expense for 2X19? What is the carrying amount of note payable on December 31, 2X19?
- An entity had the following liabilities on December 31, 2020: Accounts Payable 55,000 Unsecured notes, 8% due 7/1/2021 400,000 Accrued expenses 35,000 Contingent liability 450,000 Deferred tax liability 25,000 Senior bonds, 7%, due 3/31/2021 1,000,000 The contingent liability is an accrual for possible loss on a P1,000,000 lawsuit filed against the entity. The legal counsel expects the suit to be settled in 2021 and has estimated that the entity will be liable for damages in the range of P450,000 to P750,000. The deferred tax liability is expected to reverse in 2021. What amount should be reported on December 31, 2020 for current liabilities? None of theseNone of these 940,000940,000 1,490,0001,490,000 1,515,0001,515,000…Hunter Corporation pays an annual insurance premium of $8,500 to cover the lives of its board officers. According to the terms of the insurance contract, the cash surrender value of the policies increase from $10,000 to $11,500 during that year. The adjusting entry that Hunter would record at the end of the year to increase the cash surrender value would include a credit to Insurance Expense for $8,500. debit to Prepaid Insurance for $8,500. debit to Cash Surrender Value of Life Insurance for $1,500. credit to Cash for $1,500.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!
- 1. On January 1, 2020, Sheffield signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of $100,000. Of this amount, $20,000 was paid when the agreement was signed, and the balance is payable in 4 annual payments of $20,000 each, beginning January 1, 2021. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2020, of the 4 annual payments discounted at 12% (the implicit rate for a loan of this type) is $60,750. The agreement also provides that 6% of the revenue from the franchise must be paid to the franchisor annually. Sheffield’s revenue from the franchise for 2020 was $840,000. Sheffield estimates the useful life of the franchise to be 10 years. (Hint: You may want to refer to Chapter 18 to determine the proper accounting treatment for the franchise fee and payments.) 2. Sheffield incurred $60,000 of experimental and development…Assume that on May 31st, AI Sawadi LLC asks to extend its past-due OMR 2000 account payable to Baraka LLCC. After some negotiations, Baraka LLC agrees to accept OMR 500 cash and a 60-day, 10%, OMR 1500 note payable to replace the account payable. From the following given options choose the correct journal entry to be recorded in the books of Al Sawadi LLC at the time of note payable on due date. (Note: Assume 360 days in a year) a. Dr Note payable A/C OMR 1500 Dr interest expenses A/C OMR 150 and Cr Cash OMR OMR 1650 b. Dr Note payable A/C OMR 1500 Dr interest expenses A/C OMR 25 and Cr Cash OMR OMR 1525 c. None of the given options d. Dr Cash OMR OMR 1525 and Cr Note payable A/C OMR 1500 Cr interest expenses A/C OMR 25On July 1, 2019, Hart signed an agreement to operate as a franchisee of Ace Printers for an initial franchise fee of P12,000,000. The same date, Hart paid P4,000,000 and agreed to pay the balance in four equal annual payments of P2,000,000 beginning July 1,2019. The down payment is not refundable and no future services are required ofthe franchisor. Hart can borrow at 14% for a loan of this type. Present and future value factors are as follows:Present value of 1 at 14% for 4 periodsFuture amount of 1 at 14% for 4 periodsPresent value of an ordinary annuity of 1 at 14% for 4 periods Hart should record the acquisition cost of the franchise on July 1,2019 at
- On December 31, 2021, LoL Co. was indebted to Garena Street Company on a P2M, 10% note. Only interest had been paid to date. Due to its financial difficulties LoL has negotiated a restructuring of its notes payable. The parties agree that LoL would settle the debt on the following terms: • Settle one half of the note by transferring land with a recorded value of P800,000, and a fair value of P900,000. • Settle one fourth of the note by transferring 200,000 shares of P1 par ordinary shares with a fair value of P1.80 per share. • Modify the terms of the remaining one fourth of the note by reducing the interest to 5%, extend the due date three years from the date of restructuring and reducing the principal to P300,000. Total gains on the settlement of debt to be recognized in profit or loss is: A.P337,306B.P340,000C.P437,306D.P577,306Prior to filing a voluntary Chapter 7 bankruptcy petition, Haynes Company pays a supplier $13,000 to satisfy an unsecured claim. Haynes was insolvent at the time. Subsequently, the trustee appointed to oversee this liquidation forces the return of the $13,000 by the supplier. Which of the following is true?a. A preference transfer has been voided.b. All transactions just prior to a voluntary bankruptcy proceeding must be nullified.c. The supplier should sue for the return of this money.d. The $13,000 claim becomes a liability with priority.A factory sold to one of its customers a certain amount of products worth $120,000. The client had to settle the commitment at the end of three months by paying $142,921.92. However, after sixty days, the client proposed to settle the debt in the amount of $129,792. Will it be advantageous to accept the proposal?