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: 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: 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?
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
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 30E
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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:
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?
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