Chapte 7 - Note Payable and Debt Restructure

Question 1

Unconditional promise in eriting made by one person to another, signed by the maker, engaging to pay on demand o at a fixed or determinable future time a sum certain in money to order or to bearer.

Answer 1

Promissory note

Question 2

Initial measurement of note payable

Answer 2

Fair value minus transaction costs that are directly attributable to the issue of the note payable.

Question 3

Dif the note payable is irrevocably designated at fair value through profit or loss, the transaction costs are?

Answer 3

Expensed immediately

Question 4

What is the fair value of the note payable?

Answer 4

Present value of the future cash payment to settle the note payable.

Question 5

The discounted amount of the future cash outflow in settling the note payable using the market rate of interest.

Answer 5

Present value

Question 6

Subsequent measurement of note payable

Answer 6

1. At amortized cost using the effective interest method.
2. At fair value through profit or loss if the note payable is designated irrevocably as measured at fair value through profit or loss.

Question 7

When a note is issued solely for cash, the present value is equal to?

Answer 7

Cash proceeds

Question 8

When a property or noncash asset is acquired by issuing a promissory note which is interest bearing, the property is recorded at?

Answer 8

Purchase price

Question 9

When a noninterest bearing note is issued for property, the property is reccorded at?

Answer 9

Cash price oftge property

Question 10

The difference between the cash price and the face of the note issued.

Answer 10

Imputed interest

Question 11

A situatiin where the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants to the debtor concession that would not be granted in a normal business relationship.

Answer 11

Debt restructuring

Question 12

What is the objective of the creditor in a debt restructuring?

Answer 12

To make the best of a bad situation or maximize recovery of investment.

Question 13

Types of debt restructuring

Answer 13

1. Asset swap
2. Equity swap
3. Modification of terms

Question 14

The transfer by the debtor to the creditor of any asset, such as real state, inventory, receivables and investment, in full payment of an obligation.

Answer 14

Asset swap

Question 15

It is treated as a derecognition of a financial liability or extinguishment o an obligation.

Answer 15

Asset swap

Question 16

The difference between the fair value of the asset and its carrying amount

Answer 16

Gain or loss on exchange

Question 17

The difference between the carrying amount of the liability and the fair value of the asset.

Answer 17

Gain or loss from restructuring

Question 18

It arises when a mortgaged property is offered by the debtor in full settlement of the debt.

Answer 18

Dacion en pago

Question 19

A transaction whereby a debtor and creditor may renegotiate the terms of a financial liability with tge result that the liabikity is fully or partially extiguished by the debtor issuing equity instruments to the creditor.

Answer 19

Equity swap

Question 20

The equity instruments issued to extinguish a financial liability shall be measured at?

Answer 20

1. Fair value of equity instruments issued
2. Fair value of liability extinguished
3. Carrying amount of liability extinguished

Question 21

It may involve a reduction of interest, forgiveness of unpaid interest or a moratorium on interest payment.

Answer 21

Interest concession

Question 22

It may involve an extension of the maturity date or a reduction othe amount to be paid at maturity.

Answer 22

Maturity value concession

Question 23

There is substantial modification of terms if the gain or loss on extinguishment is?

Answer 23

At least 10% or 10% or more of the old dmfinancial liability