On January 1, 2021, Lizelle Company signed a P100,000, 12% note due in three years at a discount rate of 10%. Lizelle Company elects to use the fair value option for reporting its financial liabilities. On December 31, 2021 and December 31, 2022, Lizelle’s credit rating and risk factors indicated that the rate of interest applicable to its borrowings was 11% and 9% respectively.
On January 1, 2021, Lizelle Company signed a P100,000, 12% note due in three years at a discount rate of 10%. Lizelle Company elects to use the fair value option for reporting its financial liabilities. On December 31, 2021 and December 31, 2022, Lizelle’s credit rating and risk factors indicated that the rate of interest applicable to its borrowings was 11% and 9% respectively.
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 14RE: On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment....
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On January 1, 2021, Lizelle Company signed a P100,000, 12% note due in three years at a discount rate of 10%. Lizelle Company elects to use the fair value option for reporting its financial liabilities. On December 31, 2021 and December 31, 2022, Lizelle’s credit rating and risk factors indicated that the rate of interest applicable to its borrowings was 11% and 9% respectively.
1. What is the gain (loss) from change in fair value of the note that will be recognized by Lizelle in 2022?
2. What is the gain (loss) from change in fair value of the note that will be recognized by Lizelle in 2021?
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