1. VTS Company is experiencing financial difficulty and is negotiating a debt restructuring with its creditors. VTS Company has an outstanding financial liability of P2,500,000. BBB Financing Company accepted an equity interest in VTS Company in the form of 400,000, P5 par value ordinary shares which at the time of restructuring was quoted at P6.00 per share. The fair value of the obligation at the time of the restructuring was P2,450,000. The amount of gain to be recognized arising from the debt restructuring by way of an equity swap is _____________.

2. Noelbic Company is experiencing financial difficulties with Andro Bank. The entity negotiated with the bank and arrived at an agreement to restructure a note payable at the end of the current period. The entity owed the bank principal amount of P8,000,000 and accrued interest of P960,000. Based on the agreement, the bank will accept equipment with a fair value of P1,600,000 and a note receivable from customer with carrying amount of P5,000,000. It was determined that the equipment had been acquired at P2,600,000 with accumulated depreciation of P600,000. What amount of gain from extinguishment of debt should be recognized? ______________.

3. Sloth Company has an overdue 8% note payable to Rich Bank at P4,000,000 and accrued interest of P320,000. As a result of a restructuring agreement on January 1, 2018, Rich Bank agreed to the following provisions: Principal obligation is reduced to P3,500,000, the accrued interest is forgiven, the maturity date is extended to December 31, 2021, and the new interest rate increased to 12% to be paid every December 31. The PV of 1 for 4 periods is 0.74 at 8% and 0.64 at 12%. The PV of an ordinary annuity of 1 for 4 periods is 3.31 at 8% and 3.04 at 12%. What is the gain on extinguishment to be recognized for 2018? ____________.

4. Use the following information for the next two (2) questions:

Aviator Company had bonds payable with face amount of P10,000,000 and a carrying amount of P9,600,000. In addition, unpaid interest on the bonds was accrued in the amount of P500,000. The creditor had agreed to the settlement of the bonds payable in exchange for 50,000 shares of P100 par value. The shares have no reliable measure of fair value. However, the bonds are quoted at P7,000,000.

What is the gain on the extinguishment of the bonds payable? ______________.

5. What amount of share premium should be recognized as a result of the equity swap? ___________.

6. Due to extreme financial difficulties Overgrowth Company negotiated to restructure its 10%, P5,000,000 note obligation maturing on December 31, 2017. The following modifications are to be applied in relation to the debt restructuring agreement as approved by Gawain Financing.

• Waiver of the unpaid interest amounting to P500,000.
• Reduction of the principal amount of P4,000,000.
• Reduction of the original interest to 8%.
• Extension of the due date three years from December 31, 2017.
• Present value of P1 @ 10% for three periods is 0.75.
• Present value of an ordinary annuity of P1 @ 10% for three periods 2.49.

The gain to be recognized arising from the debt restructuring by way of a modification of terms is ____________.