Eddy Co. is indebted to Cole under a P400,000, 12%, three-year note dated December 31, 2019. Because of Eddy’s financial difficulties developing in 2021, Eddy owed accrued interest of P48,000 on the note at December 31, 2021. Under a debt settlement, on December 31, 2021, Cole agreed to settle the note and accrued interest for a tract of land having a fair value of P360,000. Eddy’s acquisition cost of the land is P290,000. Ignoring income taxes, on its 2021 income statement Eddy should report gain/loss on the disposal of the asset of a.) P158,000 gain b.) P110,000 gain c.) P70,000 loss d.) P70,000 gain
Eddy Co. is indebted to Cole under a P400,000, 12%, three-year note dated December 31, 2019. Because of Eddy’s financial difficulties developing in 2021, Eddy owed accrued interest of P48,000 on the note at December 31, 2021. Under a debt settlement, on December 31, 2021, Cole agreed to settle the note and accrued interest for a tract of land having a fair value of P360,000. Eddy’s acquisition cost of the land is P290,000. Ignoring income taxes, on its 2021 income statement Eddy should report gain/loss on the disposal of the asset of a.) P158,000 gain b.) P110,000 gain c.) P70,000 loss d.) P70,000 gain
Chapter16: Accounting Periods And Methods
Section: Chapter Questions
Problem 15DQ
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Eddy Co. is indebted to Cole under a P400,000, 12%, three-year note dated
December 31, 2019. Because of Eddy’s financial difficulties developing in 2021, Eddy owed accrued interest of P48,000 on the note at December 31, 2021. Under a debt settlement, on December 31, 2021, Cole agreed to settle the note and accrued interest for a tract of land having a fair value of P360,000. Eddy’s acquisition cost of the land is P290,000. Ignoring income taxes, on its 2021 income statement Eddy should report gain/loss on the disposal of the asset of
December 31, 2019. Because of Eddy’s financial difficulties developing in 2021, Eddy owed accrued interest of P48,000 on the note at December 31, 2021. Under a debt settlement, on December 31, 2021, Cole agreed to settle the note and accrued interest for a tract of land having a fair value of P360,000. Eddy’s acquisition cost of the land is P290,000. Ignoring income taxes, on its 2021 income statement Eddy should report gain/loss on the disposal of the asset of
a.) P158,000 gain
b.) P110,000 gain
c.) P70,000 loss
d.) P70,000 gain
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