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Find the amount of the gain that the company will record

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Problem - ZEB Ltd., which reports under IFRS and has a December 31, 20X1 year-end issued bonds with a par value of $600,000 several years ago but is now facing financial difficulties. When the bonds were issued, the stated rate and the market rate on the bonds were equal at 5%. Now on January 1, 20X1, the market interest rate is 5.5% and the company has reached an agreement with its bond holders to lower the stated interest rate on the bonds to 4% and to also lower the par value of the bond to $588,000. The company pays interest annually on December 31 and the bonds mature in 7 years on December 31, 20X7.

Required -

1. Find the amount of the gain that the company will record on January 1, 20X1 arising from the restructuring of the bond terms.

2. Find the interest expense that the company will record for the year ending December 31, 20X1.

Reference no: EM132868578

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