DEBT RESTRUCTURING On January 1, 2022, ACT company borrowed funds from DEF Finance by issuing a promissory note for P1,500,000. Due to the economic downtrend in the industry of ACT Company, the company experienced low sales and therefore cannot meet its obligation in 2024. On December 31, 2024, which is the maturity date of the obligation, DEF finance accepted the offer of ACT Company’s building with a cost of P 2,500,000 and accumulated depreciation balance on this date of P 750,000 in full settlement of the note and annual accrued interest at 12%. Interest is payable annually and the building has a fair value on the date of restructuring of P 1,600,000. Provide the journal entries for each problems and assumptions.
DEBT RESTRUCTURING
On January 1, 2022, ACT company borrowed funds from DEF Finance by issuing a promissory note for P1,500,000. Due to the economic downtrend in the industry of ACT Company, the company experienced low sales and therefore cannot meet its obligation in 2024. On December 31, 2024, which is the maturity date of the obligation, DEF finance accepted the offer of ACT Company’s building with a cost of P 2,500,000 and
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Equity Swap
Assuming DEF Finance agreed to receive 50,000 ordinary shares of ACT Company in full settlement of its obligation. ACT Company’s ordinary share has a par value of P 20 and a fair value of P 35.
Provide the
by Bartleby ExpertModification of terms:
Assuming DEF Finance agreed to the following modifications on December 31, 2024:
a.) Extension of maturity date to December 31,2027.
b.) Reduction of interest rate from 12% to 10%.
c.) Condonation of accrued interest
d.) Reduction of principal to P 1,200,000.
by Bartleby ExpertAssuming DEF Finance agreed to receive 50,000 ordinary shares of ACT Company in full settlement of its obligation. ACT Company’s ordinary share has a par value of P 20 and a fair value of P 35.
Provide the
by Bartleby Expert
