DIRECTIONS:

Show you solution on POST TEST in good form

Solution 1

Redemption Price (600 x 1,000 x 102%) 612,000

Less: Carrying amount on bonds:

Face Amount (600 x 1,000) 600,000

Unamortized Premium 65,000 665,000

Gain on Retirement ₱53,000

Solution 2

Payment for Liability:

Cash 50,000
Carrying Amount of investment securities 375,000 425,000
Carrying Amount of liability settled:
Principal 500,000
Accrued Interest 75,000
575,000
Gain on Settlement 150,000

Solution 3

185,000 carrying amount of note – 85,000 carrying amount of land = ₱100,000 gain

Solution 4

28,000 – 25,000 = 3,000

Solution 5

The modification is analyzed as follows:

Terms Old New Terms

Principal 950,000

1,000,000 30,000
Accrued Interest 1 year
40,000
Remaining Term (‘n’)

The present value of the modified liability is computed as follows:

Future Cash Flows PV of 1@ 10%, Present Value

n=1

Principal 950,000 0.90909

863,636
Interest 30,000 0.90909
27,273
Present value of the modified liability
890,908
The difference between the old liability and the new liability is tested for substantiality.

Carrying amount of old liability (1M principal + 40k accrued interest)

1,040,000
Present value of the modified liability
890,908
Difference
149,092