Question
On December 31, 2016, X Corp. was indebted to Zyland Co. on a P1,000,000, 10% note. Only interest had been paid to date, and the
On December 31, 2016, X Corp. was indebted to Zyland Co. on a P1,000,000, 10% note. Only interest had been paid to date, and the remaining life of the note was 2 years. Because X Corp. was in financial difficulties, the parties agreed that X Corp. would settle the debt on the following terms:
Settle one-half of the note by transferring land with a recorded value of P400,000 and a fair value of P450,000
Settle one-fourth of the note by transferring 10,000, P1 par, ordinary shares with a fair market value of P15 per share
Modify the reducing the remaining one-fourth of the note by reducing the interest rate to 5% for the remaining 2 years and reducing the principal to P150,000.
What total gains should X Corp. record in 2016 from this troubled debt restructuring?
a. P100,000c. P213,024
b. P200,000d. P313,024
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Financial Accounting
Authors: Robert Libby, Patricia Libby, Daniel Short, George Kanaan, M
5th Canadian edition
978-1259103285
