1.) The balance sheet accounts of John Company on the date it is allowed to effect a quasi-reorganization follows: Current asset 3,100,000 Property & equipment (net) 9,300,000 Liabilities 6,200,000 Share capital, par P100 7,750,000 Retained earnings (Deficit) (1,550,000) The quasi-reorganization is to be accomplished as follows: property and equipment will be reduced to current value of) 3,975,000, share capital will be reduced to par value of P50 per share: and the resulting deficit balance will be absorbed by the reduction of the share capital. The total shareholders' equity immediately after the quasi-reorganization is a) 6,200,000 b) 3,875,000 c) 7,750,000 d) 5,425,000 e) Answer not given2.) On December 31, 2015, John Company was experiencing financial difficulties and entered into a debt restructuring agreement with the creditor. The creditor restricted the obligation as follows: . The principal was reduced from P6,000,000 to P5,400,00 . Forgave the accrued interest of P720,000 . Extended the maturity date from Dec 31, 2015 to Dec 31, 2018 . Reduced the interest from 12% to 10%. Interest is payable annually on Dec 31, 2016, 2017, and 2018. The present value of 1 at 12% is 0.712. The present value of an ordinary equity at 12% is 2.402. The creditor should report a loss on debt restructuring the amount of a) 0 b) 1,172,520 c) 1,452,840 d) 1,578,120 e) Answer not given3.) John Co. has incurred losses from operations for many years. At the recommendation of the newly hired president, the board of directors voted to implement a quasi-reorganization on June 30, 2015. The balance sheet is shown below: Current assets 2,200,000 Liabilities 2,400,000 Property & equipment 5,400,000 Ordinary shares, par P10 6,400,000 Other assets 800,000 Share premium 1,200,000 Total 8,400,000 Deficit (1,600,000) Total 8,400,00 The shareholder approved the quasi-organization to be accomplished by a reduction in property & equipment of P1, 400,000, a reduction in their assets of P600, 000 and a reduction in par value by P5 per share. a) 4,800,000 b) 4,000,000 c) 6,400,000 d) 7,600,000 e) Answer not given4.) Island Company owns a P2,000,000 plus P180,000 of accrued interest to First State Bank. The debt is a 10-year note. During 2011, Island's business deteriorated due to a faltering regional economy. On December 31, 2014, First State bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of P3,900,000 , accumulated depreciation of P2,210,000 and a fair market value of P1,900,000. How much should Island Company recognize as a finance income in its profit or loss as a result of the financial liability's derecognition? a) 210,000 b) 280,000 c) 310,000 d) 490,000 e) Answer not given 5.) Turtle Company is experiencing financial difficulty and is negotiating trouble debt restructuring with its creditors to relive its financial stress. Turtle has a P5,000,000 note payable to Metrobank. The bank is considering acceptance of an equity interest in Turtle Company in the form of 400,000 ordinary shares with a fair value of P12 per share. The par value of the ordinary share is P10 per share. 1.) If the issue of equity is treated as a conversion of an existing debt, what is the amount of gain to be reported by Turtle in its profit or loss statement as a result of the restructuring? a) None b) 200,000 c) 500,000 d) 1,000,000 e) Answer not given Il.) If the issue of equity is treated as an extinguishment of an existing debt instrument, what is the amount of gain to be reported by Turtle in its profit or loss statement as a result of the restructuring? a) None b) 200,000 c) 500,000 d) 1,000,000 e) Answer not given