Reference no: EM132973500
Questions -
Q1) On January 1, 2018, Audi Corporation sold equipment costing P380,000 with accumulated depreciation P160,000 on the date of sale. Audi received as consideration for the sale, a P400,000 non interest-bearing note, due January 1, 2021. The was no established exchange price for the equipment and the note had no ready market. The prevailing rate of interest for a note of this type at January 1, 2019 was 10%. The present value of 1 at 10% for three periods is 0.75.
What is the carrying amount of the note at Audi's December 31, 2019 statement of financial position?
Q2) Candy, one of the Goldsmith Company's credit customers, is experiencing financial difficulties and a downward trend in its financial performance. The firm is unable to service its debts and as a result has missed the payment of its note and accrued interest with Goldsmith Company. The principal amount of the note is P500,000 (which is already due) with annual interest of 10% payable annually. Accrued interest balance at December 31, 2019 is P50,000. Candy management has negotiated a modification of its debt terms with Goldsmith Company. At this time, the prevailing market rate of interest for similar transaction remained at 10%.
Goldsmith Company agreed to the following new terms:
- Forgive the accrued interest at December 31, 2019
- Extend the payment of the principal for two years
- Reduce the interest rate (payable annually) to 8%
How much impairment loss should be recognized by Goldsmith Company on December 31, 2019?
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