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    Accounting 4 Note Payable and Debt Restructure

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    loren
    The document contains 5 sections that provide accounting questions related to notes payable and debt restructuring. Section 1 asks questions about accrued interest payable and interest expense calculations for notes payable. Section 2 asks about accrued interest payable on a 2-year note. Section 3 asks questions about gains/losses from transferring real estate as part of debt restructuring. Section 4 asks questions about gains from extinguishing debt by issuing shares. Section 5 asks questions about calculating gains from restructuring a note payable by reducing the face amount, interest rate, and extending the due date.

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    Accounting 4 Note Payable and Debt Restructure

    Uploaded by

    loren
    453 views2 pages
    The document contains 5 sections that provide accounting questions related to notes payable and debt restructuring. Section 1 asks questions about accrued interest payable and interest expense calculations for notes payable. Section 2 asks about accrued interest payable on a 2-year note. Section 3 asks questions about gains/losses from transferring real estate as part of debt restructuring. Section 4 asks questions about gains from extinguishing debt by issuing shares. Section 5 asks questions about calculating gains from restructuring a note payable by reducing the face amount, interest rate, and extending the due date.

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    ACCOUNTING 4 NOTE PAYABLE AND DEBT RESTRUCTURE

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    The document contains 5 sections that provide accounting questions related to notes payable and debt restructuring. Section 1 asks questions about accrued interest payable and interest expense calculations for notes payable. Section 2 asks about accrued interest payable on a 2-year note. Section 3 asks questions about gains/losses from transferring real estate as part of debt restructuring. Section 4 asks questions about gains from extinguishing debt by issuing shares. Section 5 asks questions about calculating gains from restructuring a note payable by reducing the face amount, interest rate, and extending the due date.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    453 views2 pages

    Accounting 4 Note Payable and Debt Restructure

    Uploaded by

    loren
    The document contains 5 sections that provide accounting questions related to notes payable and debt restructuring. Section 1 asks questions about accrued interest payable and interest expense calculations for notes payable. Section 2 asks about accrued interest payable on a 2-year note. Section 3 asks questions about gains/losses from transferring real estate as part of debt restructuring. Section 4 asks questions about gains from extinguishing debt by issuing shares. Section 5 asks questions about calculating gains from restructuring a note payable by reducing the face amount, interest rate, and extending the due date.

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    © All Rights Reserved
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    of 2

    ACCOUNTING 4 NOTE PAYABLE AND DEBT RESTRUCTURE

    1. On September 1, 2019, an entity borrowed on a P5,400,000 note payable from a bank. The note bears
    interest at 12% and is payable in three equal annual principal payments of P1,800,000. On this date,
    the bank’s prime rate was 11%. The first annual payment for interest and principal was made on
    September 1, 2020.

    Question 1. On December 31, 2019, what amount should be reported as accrued interest payable?
    a. 144,000
    b. 216,000
    c. 132,000
    d. 198,000

    Question 2. What is the interest expense for 2020?


    a. 576,000
    b. 432,000
    c. 648,000
    d. 594,000

    2. On March 1, 2019, an entity borrowed P5,000,000 and signed a 2-year note bearing interest at 12% per
    annum coumpounded annually. Interest is payable in full at maturity on February 28, 2021. What
    amount should be reported as accrued interest payable on December 31, 2020?
    a. 1,200,000
    b. 1,160,000
    c. 1,600,000
    d. 600,000

    3. An entity transferred real estate pursuant to a debt restructuring in full liquidation of liability to the
    creditor:

    Carrying amount of liability liquidated 1,500,000


    Carrying amount of real estate transferred 1,000,000
    Fair value of real estate transferred 900,000

    Question 1. Under IFRS, what amount of gain on extinguishment of debt should be reported as
    component of income from the continuing operations?
    a. 300,000
    b. 500,000
    c. 100,000
    d. 0

    Question 2. Under US GAAP, what is the gain on restructing?


    a. 600,000
    b. 500,000
    c. 100,000
    d. 0

    Question 3. Under US GAAP, what amount should be reported as gain or loss on transfer of real
    estate?
    a. 100,000 loss
    b. 500,000 gain
    c. 400,000 gain
    d. 0
    4. An entity showed the following information at year-end:

    Note payable 5,000,000


    Accrued interest payable 500,000

    An entity is threatened with a court suit if it could not pay the maturing debt. Accordingly, the entity
    entered into an agreement with the creditor for the issuance of share capital in full settlement of the
    note payable. The agreement provided for the issue of 50,000 ordinary shares with par value of P50 and
    quoted price of P70. The fair value of the note payable is P4,000,000.

    Question 1. What is the gain from extinguishment of debt if the entity swap is measured at the fair
    value of the shares?
    a. 2,000,000 c. 3,000,000
    b. 1,500,000 d. 0

    Question 2. What is the gain from extinguishment of det if the equity swap is measured at the fair
    value of the liability?
    a. 2,000,000 c. 3,000,000
    b. 1,500,000 d. 0

    Question 3. What amount should be recognized as share premium if the equity swap is measured at
    the carrying amount of liability?
    a. 3,000,000
    b. 2,500,000
    c. 1,000,000
    d. 1,500,000

    5. Due to extreme financial difficulties, an entity negotiated a restructuring of a 10%, P5,000,000 note
    payable due on December 31, 2019. The unpaid interest on the note on such date is 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, 2019. The present value of 1 at 10%
    for three periods is 0.5 and the present value of an ordinary annuity of 1 at 10% for three periods is
    2.49.

    Question 1. Under IFRS, what is the gain on extinguishment for 2019?


    a. 1,703,200
    b. 1,203,200
    c. 2,000,000
    d. 540,000

    Question 2. What is the discount or premium on the new note payable on December 31, 2019?
    a. 1,000,000 premium
    b. 1,000,000 discount
    c. 203,200 premium
    d. 203,200 discount

    Question 3. What amount should be reported as interest expense for 2020?


    a. 320,000
    b. 379,000
    c. 400,000
    d. 303,680

    Question 4. What is the carrying of note payable on December 31, 2020?


    a. 4,000,000
    b. 5,000,000
    c. 3,856,480
    d. 3,737,120

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