Problem 8. Due to financial difficulty and insolvency, NFL Inc. used different types of debt restructuring regarding its debts on December 31,2011: a. On December 31, 2011, NFL restructured its Note Payable with face value of P2,000,000 and interest payable of P400,000 through an asset swap. NFL transferred an equipment with a cost of P2,000,000 and accumulated depreciation of P500,000 to the creditor as payment of the debt. The fair value of the equipment is P2,200,000. b. On December 31,2011, NFL restructured its Bonds Payable with carrying value of P5,000,000 and interest payable of P500,000 through an equity swap. NFL issued ordinary share with a total par value of P2,000,000 and fair value of P4,500,000 in full settlement of the bonds payable and accrued interest. The fair value of the bonds payable is P4,700,000. c. On December 31,2011, a creditor of NFL granted a credit concession to NFL. The following data are provided concerning the concession: Note Payable - due December 31,2012-14% Accrued Interest payable Modified Terms: P5,000,000 1,000,000 a. The accrued interest of P1,000,000 is forgiven. b. The principal obligation is reduced to P4,000,000. c. The new interest rate is 10% payable every December 31. d. The new date of maturity is December 31,2015. d. On December 31,2011, another creditor granted a credit concession to NFL. The following data are provided concerning the concession: Note Payable - due December 31,2012 - 10% Accrued Interest payable P5,000,000 1,000,000 Modified Terms: a. The accrued interest of P1,000,000 is forgiven. b. The interest rate is 14% payable every December 31. c. The date of maturity is December 31,2014 Note: The prevailing interest rate of this type of note at the market is 12% on December 31,2011. Required: Based on the result of your audit, determine the following: (Use 4 decimal places for present value factor) 1. Gain on extinguishment of Notes Payable through Asset Swap 2. Gain on extinguishment of Bonds Payable through Equity Swap 3. Gain on extinguishment of Notes Payable through modification of terms (letter C) 4. Gain on extinguishment of Notes Payable through modification of terms (letter D)

Problem 8. Due to financial difficulty and insolvency, NFL Inc. used different types of debt restructuring regarding its debts on December 31,2011: a. On December 31, 2011, NFL restructured its Note Payable with face value of P2,000,000 and interest payable of P400,000 through an asset swap. NFL transferred an equipment with a cost of P2,000,000 and accumulated depreciation of P500,000 to the creditor as payment of the debt. The fair value of the equipment is P2,200,000. b. On December 31,2011, NFL restructured its Bonds Payable with carrying value of P5,000,000 and interest payable of P500,000 through an equity swap. NFL issued ordinary share with a total par value of P2,000,000 and fair value of P4,500,000 in full settlement of the bonds payable and accrued interest. The fair value of the bonds payable is P4,700,000. c. On December 31,2011, a creditor of NFL granted a credit concession to NFL. The following data are provided concerning the concession: Note Payable - due December 31,2012-14% Accrued Interest payable Modified Terms: P5,000,000 1,000,000 a. The accrued interest of P1,000,000 is forgiven. b. The principal obligation is reduced to P4,000,000. c. The new interest rate is 10% payable every December 31. d. The new date of maturity is December 31,2015. d. On December 31,2011, another creditor granted a credit concession to NFL. The following data are provided concerning the concession: Note Payable - due December 31,2012 - 10% Accrued Interest payable P5,000,000 1,000,000 Modified Terms: a. The accrued interest of P1,000,000 is forgiven. b. The interest rate is 14% payable every December 31. c. The date of maturity is December 31,2014 Note: The prevailing interest rate of this type of note at the market is 12% on December 31,2011. Required: Based on the result of your audit, determine the following: (Use 4 decimal places for present value factor) 1. Gain on extinguishment of Notes Payable through Asset Swap 2. Gain on extinguishment of Bonds Payable through Equity Swap 3. Gain on extinguishment of Notes Payable through modification of terms (letter C) 4. Gain on extinguishment of Notes Payable through modification of terms (letter D)

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter11: The Statement Of Cash Flows

Section: Chapter Questions

Problem 63.3C: Income, Cash Flow, and Future Losses On January L 2017, Cermack National Bank loaned 55,000,000...

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