Reference no: EM132967752
Question - On December 31, 2020, a corporation is indebted on a P6,000,000, 15% bonds payable. Only interest had been paid up to date.
Due to financial difficulties, the corporation negotiated a restructuring of the liability at the same date. The parties agreed that the corporation will settle the debt on the following terms:
-30% of the bonds through transfer of land having a recorded value of P2,100,000 and fair value of P2,000,000.
-30% of the bonds through transfer of 120,000 P10 par ordinary shares with a fair market value per share of P12.
-40% of the bonds by reducing interest rate to 12%, extending the due date eight years from date of restructuring and reducing the principal to P2,000,000.Round present value factors to four decimal points.
Required -
(1) Determine the Net gain (loss) on extinguishment of debt (if loss, enclose in parentheses or add a negative sign).
(2) Determine the Total share premium to be recognized on portion settled through issuance of ordinary shares.
(3) Determine the Carrying amount of the bonds payable on December 31, 2021.
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