Reference no: EM132708511

Questions -

Q1. Dolphin Company is experiencing financial difficulty and is negotiating debt restructuring with its creditor to relieve its financial stress. Dolphin has a P2,500,000 bank loan payable with BDO Bank. The bank accepted an equity interest in Dolphin Company in the form of 200,000 ordinary shares quoted at P12 per share. The par value is P10 per share. The fair value of the bank loan payable on the date of restructuring is P2,200,000. What amount should be recognized as gain from debt extinguishment as a result of the equity swap?

Q2. On March 31, 20x7, EASY issued for P1,774,000, P2,000,000 face amount of its 10%, P1,000 bonds. The bonds were issued to yield 12%. The bonds are dated July 1, 20x7 and mature on July 1, 20x10. Interest is payable annually on July 1. EASY uses the interest method to amortize bond discount. Determine the carrying value of the Bonds on December 31, 20x7.

Q3. On February 5, 2020, an employee filed a P2,000,000 lawsuit against Steel Company for damages suffered when one of Steel's plant exploded on December 9, 2019. The legal counsel believed the entity would probably lose the lawsuit and estimated the loss to be P500,000. The employee offered to settle the lawsuit out of court for P900,000 but the entity did not agree to the settlement. On December 31, 2019, what amount should be reported as liability from lawsuit?