CHAPTER 8 - Reorganization and Troubled Debt Restructuring...

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Reorganization and Troubled Debt Restructuring 135 CHAPTER 8 MULTIPLE CHOICE ANSWERS AND SOLUTIONS 8-1: a Trade accounts payable (P52,000 + P62,700) P114,700 12% preferred stock (5,000 x P1) P 5,000 Paid in capital in excess of par (5,000 x P9) 45,000 Cash (P62,700 x P0.80) _50,160 _100,160 Gain from discharge of indebtedness P 14,540 8-2: c 8-3: c 8-4: b Carrying value of the note payable: Principal P600,000 Interest __60,000 P660,000 Restructured value: Principal P400,000 Interest _110,000 _510,000 Gain on debt restructuring P150,000 8-5: d Other income : Fair value of land P450,000 Books value of land _360,000 Other income P 90,000 Extraordinary gain: Book value of note payable Principal P500,000 Interest __60,000 P560,000 Fair value of land
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_450,000 Extraordinary gain P110,000 8-6: a Book value of bonds payable P500,000 Par value of preferred stock (5,000 shares x P100) _500,000 No gain no loss P –0– 136 Chapter 8 8-7: a Book value of notes payable: Principal P 2,500 Interest ___500 P 3,000 Par value of common stock issued (200 shares x P5) __1,000 Additional paid in capital P 2,000 Add gain on payment of accounts payable: Book value P 10,000 Payment __8,000 __2,000 Total gain on debt discharge P 4,000 8-8: a Carrying value of debt: Note payable P100,000 Interest payable __12,000 P112,000 Fair value machinery _(36,000 ) Balance of debt P 76,000 Restructured debt: Note payable P 50,000 Interest (P50,000 x .08 x 2) ___8,000 __58,000
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Restructuring difference (gain) P 18,000 8-9: d Principal P300,000 Interest payable (300,000 x 10%) __30,000 Carrying value P330,000 8-10: c Should be P310,600 Restructured principal of note payable P260,000 Interest payable: On book value (P300,000 x 10% 30%) P 9,000 On restructured (P260,000 x 8% x 2) _41,600 __50,600 Future cash flows to liquidate the debt P310,600 8-11: d 8-12: d Loss on transfer of land: Original cost P290,000 Market value _270,000 P 20,000 Gain on restructuring of debt: Carrying value of debt P300,000 Market value of land _270,000 P 30,000 Reorganization and Troubled Debt Restructuring 137 8-13: a Transfer gain (loss): Carrying amount of equipment P80,000 Fair value of equipment 75,000 Transfer loss P(5,000) Restructuring gain: Carrying amount of the debt P100,000 Fair value of equipment transferred 75,000 Restructuring gain P 25,000 8-14: d Carrying amount of real estate transferred P100,000
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CHAPTER 8 - Reorganization and Troubled Debt Restructuring...

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