Reference no: EM132982309

Question - In 2006, Bunny Corp. acquired land by paying P300,000 and signing a note with a maturity value of P4,000,000, on the note's due date, December 31, 2006. Bunny owed P320,000 of accrued interest and P4,000,000 principal on the note. Bunny was in financial liability and was unable to make any payments. Bunny and the bank agreed to amend the note as follows: The P320,000 interest due on December 31, 2006 was forgiven. The principal of the note was reduced by P200,000 and the maturity date was made payable December 31, 2007. Bunny would be required to make one interest payment totaling P342,000 on December 31, 2007.On December 31, 2006, the prevailing rate of interest for a similar debt instrument is 9%. As a result of the restructuring of debt, how much should Bunny report as gain, before income taxes, in its 2006 income statement?

A company reacquires shares of its own during the fiscal year and reports the transaction in the theoretically correct manner. What effect will this transaction have on shareholders' equity and earnings per share, respectively?