ADVANCED ACCOUNTING(LL) W/CONNECT
13th Edition
ISBN: 9781260282382
Author: Hoyle
Publisher: MCG
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Question
Chapter 13, Problem 47P
a.
To determine
Explain how this note would be reported in a statement of financial affairs.
b.
To determine
Explain how Company A would record the reorganization.
c.
To determine
Find how much will be collected by various parties.
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In 2X19, Land Corporation acquired land by paying P2,000,000 and signing a note with a face value of
P6,000,000. On the note’s due date, December 31, 2X21, Land owed P480,000 of accrued interest and
P6,000,000 on the note. Land was in financial difficulty and was unable to make any payments. To solve the
problem, Land and the bank agreed to amend the note as follows:
• Extended the maturity to December 31, 2X23.
• The P480,000 interest due on December 31, 2X21 was forgiven.
• Land Corporation would be required to make an annual interest payment of P540,000 every December
31 starting 2X22.
• Transaction cost incurred that is directly related to the debt restructuring was P16,850.
As of December 31, 2X21, the yield rate based on the restructured debt and after considering the amount of
transaction cost is 6.24%.
8. What is the carrying amount of the obligation that should be reported in 2X22 statement of financial
position?
9. Provide the journal entry for debt…
In 2X19, Land Corporation acquired land by paying P2,000,000 and signing a note with a face value of
P6,000,000. On the note’s due date, December 31, 2X21, Land owed P480,000 of accrued interest and
P6,000,000 on the note. Land was in financial difficulty and was unable to make any payments. To solve the
problem, Land and the bank agreed to amend the note as follows:
• Extended the maturity to December 31, 2X23.
• The P480,000 interest due on December 31, 2X21 was forgiven.
• Land Corporation would be required to make an annual interest payment of P540,000 every December
31 starting 2X22.
• Transaction cost incurred that is directly related to the debt restructuring was P16,850.
As of December 31, 2X21, the yield rate based on the restructured debt and after considering the amount of
transaction cost is 6.24%.
5. What type of debt restructuring is being described by the case?
6. What is the total gain from restructuring?
7. What amount should Land Corporation report…
Lolo Co. owes $150,000 in notes payable plus $12,000 of accrued interest to, the company is
having financial difficulty.
Prepare the journal entry on Lolo Co. 's books to record the settlement of this debt
under the following independent cases:
a) To eliminate the debt, the creditor agrees to accept from Lolo Co. land having a fair
value of $140,000 and a recorded cost of $145,000.
b) To eliminate the debt, the creditor agrees to take an equity interest in Lolo Co. Lolo
Co issued 10,000 ordinary shares having a fair value of $14 per share and $5 par value
per share.
c) To eliminate the debt, the creditor agrees to restructure the debt by issuing a new zero
interest bearing note with $170,000 face value for 3 years. The market interest rate of
similar notes is 9%.
Chapter 13 Solutions
ADVANCED ACCOUNTING(LL) W/CONNECT
Ch. 13 - What does the term insolvent mean?Ch. 13 - Why should a company monitor the reporting of...Ch. 13 - Prob. 3QCh. 13 - Prob. 4QCh. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - What federal legislation governs most bankruptcy...Ch. 13 - What are the primary objectives of a bankruptcy...Ch. 13 - A bankruptcy case can begin with either a...Ch. 13 - A bankruptcy court enters an order for relief. How...
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