Due to extreme financial difficulties, ARMADA Company had negotiated a restructuring of a 10% P5,000,000 note payable due on December 31, 2020. The unpaid interest on the note on such date is P500,000. The creditor had agreed to reduce the face value to P4,000,000, forgive the unpaid interest, reduce the rate to 8% and extend the due date three years from December 31, 2020. Required: Prepare the journal entries to record the debt restructuring and related transactions in 2020
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- Current liabilities Bon Nebo Co. sold 25,000 annual subscriptions of Bjorn for 85 during December 20Y5. These new subscribers will receive monthly issues, beginning in January 20Y6. In addition, the business had taxable income of 840,000 during the first calendar quarter of 20Y6. The federal tax rate is 40%. A quarterly tax payment will be made on April 12, 20Y6. Prepare the current liabilities section of the balance sheet for Bon Nebo Co. on March 31, 20Y6.Problem 9-16 Due to extreme financial difficulties, Armada Company had negotiated a restructuring of a 10% P5,000,000 note payable due on December 31,2020. The unpaid interest on the note on such date was 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 years from December 31,2020. The present value of 1 at 10% for three periods is 0.75 and the present value of an ordinary annuity of 1 at 10% for three periods is 2.49. 1. What is the gain on extinguisment for 2020? A. 1,703,200 B. 1,203,200 C. 2,000,000 D. 540,000 2. What is the interest expense for 2021? A. 320,000 B. 379,680 C. 500,000 D. 400,000PROBLEM 3As a result of a restructuring agreement on January 1, 2018, First Bank agreed tothe following provisions: • The principal obligation is reduced to P7,000,000.• The accrued interest of P640,000 is forgiven.• The date of maturity is extended to December 31, 2021.Annual interest of 10% is to be paid for 4 years every December31.The present value of 1 at 8% for 4 periods is 0.735 and the present value of anordinary annuity of 1 at 8% for 4 periods is 3.31.Requirement:a. What is the gain on extinguishment of debt for 2018?b. What is interest expense for 2018?
- Problem 8:On January 1 2019, Sunrise Company is experiencing extreme financial pressure and is in default in meeting interest payment on its long term note of P6,000,000 due on December 31, 2020. The interest rate is 12% payable every December 31. The accrued interest payable on January 1, 2019 is P720,000.In the agreement with the creditor, Sunrise Company obtain the following changes in the terms of note:a. The accrued interest on January 1, 2019 is forgiven.b. The principal is reduced by P500,000.c. The new interest rate is 8% payable in every December 31.d. The new date of maturity is December 31, 2022.The present value of 1 at 12% for four period is 0.6355 and the present value of an ordinary annuity of 1 at 12% for four period is 3.0373.Required:1. Journal entry to record the modification of terms on January 1, 2019.2. Journal entry to record the interest payment and amortization of discount for 2019.___________________________________________________________________________Intermediate Accounting 2 2021 edition by Millan PROBLEM 4: MULTIPLE CHOICE - COMPUTATIONAL On March 1, 20X4, Fine Co. borrowed P10,000 and signed a two-year note bearing interest at 12% per annum compounded annually. Interest is payable in full at maturity on February 28, 20X6. What amount should Fine report as a liability for accrued interest at December 31, 20X5? 0 b. 1,000 c. 1,320 d. 2,320 (AICPA) On January 1, 20x1, Sunset Co. issues a P5,000,000 noninterest bearing note due on December 31, 20x4. The effective interest rate is 15%. How much is the unamortized balance of the discount on notes payable account on January 1, 20x3? 652,174 b. 1,219,282 c. 1,712,419 d. 2,141,234 The next two items are based on the following information: House Publishers offered a contest in which the winner would receive P1,000,000, payable over 20 years. On December 31, 2000, House announced the winner of the contest and signed a note payable to the winner for P1,000,000,…PROBLEM 2 (MODIFIED) Winter Corporation received the following notes in 2020: NOTE DATE PRINCIPAL AMOUNT INTEREST RATE TERM A August 31 Php 200,000 10% 6 months B October 19 Php 250,000 12% 90 days C November 11 Php 300,000 11% 1 year REQUIRED: Determine the due date, amount of interest, and maturity value of each note. Compute interest using a 360-day year for those notes with terms specified in days or years. Round all interest amounts to the nearest peso. Journalize a single adjusting entry at December 31, 2020 to record accrued interest revenue on all three notes. Journalize the collection of principal and interest on Note B. On the due date, the maker dishonored Note A. Prepare the journal entry to record the default of the maker.
- Problem 3:Intercom Company is planning to refinance certain short-term obligations on a long term basis. The entity has a December 31 year-end and the 201 9 financial statements will be published on March 15, 2020.0n December 31, 2019, before reclassification of short-term debt, the liabilities are:Current liabilities:Accounts Payable 7,000,000Note payable-bank 12,000,000Accrued expenses 4,000,000Noncurrent liabilities:Mortgage payable 4,000,000Note payable-due in 2021 3,000,000The entity intends to refinance ₱9,000,000 of the₱ 12,000,000 bank note payable on a long term basisAlthough the entire ₱12,000,000 is due on June 30, 2020, the bank has informally agreed to extend the maturity date for₱ 6,000,000 to June 30, 2021, if necessary.On January 31, 2020, the entity issued share capital for₱ 4,000,000, net issue costs and underwriting fees of ₱500,000.On February 15, 2020, the entity entered into a financing agreement with a financially capable commercial bank, permitting the entity to…Problem 9-15 During 2020, Mann Company experienced financial difficulties and is likely to default on a P5,000,000, 15% three-year note dated January 1,2018 payable to Summit Bank. On December 31,2020, the bank agreed to settle the note and unpaid interest of P750,000 for P4,100,000 cash payable on January 31,2021. 1. What amount should be reported as gain from extinguisment of debt in the 2020 income statement? A. 1,650,000 B. 900,000 C. 750,000 D. 0Problem 8-16 On March 1, 2019, Alpha Company borrowed P1,000,000 and signed a 2 year note bearing interest at 12% per anum compounded annually. Interest is payable in full at maturity on February 28,2021. 1. What amount should be reported as accrued interest payable on December 31, 2020? A. 100,000 B. 120,000 C. 232,000 D. 240,000
- Hw.128. A business borrowed $200,000 on January 1, 2019 to be paid back on January 1 2022. On January 1, 2019, the business received an amount equal to $200,000, less discounted interest based on 11.5% per year, which is the market rate. The company closes its books every December 31. a. Prepare the journal entry for the debtor on January 1, 2019. b. Prepare the journal entry on December 31, 2020 related to this debt. Suppose that the company from the previous exercise number 4 received the full sum of $200,000 on January 1, 2019 and committed to repay the loan by making three annual payments (January 1 of 2020, 2021 and 2022) equal based on an interest rate of 11.5%.IA - Receivable Financing 10. Problem Solving. A company pledged its entire accounts receivable amounting to P2,500,000 to a financing institution to a loan approved for P2,000,000. The term of the loan requires the company to pay the principal when it becomes mature 4 years from now and also to pay 12% annual interest every end of the year. Should the company has made no collateral for the loan, interest rate could have been 18%. Assuming the transaction occurred on January 1, 20A, compute the total amount of expense that should be deducted from the current year’s income of the company. Round off final answer to the nearest peso.Problem 27 On January 1, 2022, De Vera Company loaned Dagpin Company amounting to P2,000,000 and received a two-year, 6%, P2,000,000 note. The note calls for annual interest to be paid each December 31. De Vera collected the 2022 interest on schedule. However, on December 31, 2023, based on the Dagpin’s recent financial difficulties, De Vera expects that the 2023 interest, which was recorded in the books, will not be collected and that only P1,200,000 of the principal will be recovered. The P1,200,000 principal amount is expected to be collected in two equal installments on December 31, 2025 and December 31, 2027. The prevailing interest rate for similar type of note as of December 31, 2023 is 8%. What is the loan impairment loss to be recognized for the year 2023 How much is the interest income for the year 2025? The carrying amount of the loan as of December 31, 2026 is: