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 base
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 base
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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 restructuring on December 31, 2X21.
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