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Prepare journal entry on the books of Sunset Company

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Reference no: EM132837239

Problem - Sunset Company had bonds payable with face amount of P5,000,000 and a carrying amount of P4,800,000.

In addition, unpaid interest on the bonds was accrued in the amount of P250,000.

The creditor agreed to the settlement of the bonds payable in exchange for 50,000 shares of P50 par value.

The shares have a current market value of P4,500,000. The fair value of the bonds payable is P4,600,000.

Required - Prepare journal entry on the books of Sunset Company to record the settlement of the bonds payable:

1. If the fair value of the equity instruments is used.

2. If the fair value of the bonds is used.

3. If the carrying amount of the financial liability is used.

Reference no: EM132837239

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