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Mourinho Company is indebted to Guardiola Bank under a $550,000, 12%, three-year note dated December 31,...

Mourinho Company is indebted to Guardiola Bank under a $550,000, 12%, three-year note dated December 31, 2018. Because of Morinho's financial difficulties developing in 2020, Mourinho owed accrued interest of $65,000 on the note at December 31, 2020. Under a troubled debt restructuring, on December 31, 2020, Guardiola agreed to settle the note and accrued interest for a building having a fair value of $410,000. The building has a cost of $820,000 and accumulated depreciation of $308,000. How much gain/loss on the disposition of land and on restructuring of debt should Mourinho record, respectively?

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Expert Solution

Solution:

Particulars Amount in $
Cost of Land          820,000
Less: accumulated Depreciation          308,000
Balance          512,000
Fair value of Building          410,000
Gain / (Loss) on Building        (102,000)
Particulars Amount in $
Face value of 12% Notes          550,000
Accured Interest            65,000
Total          615,000
Fair value of Building          410,000
Gain / Loss on Loan Restructuring          205,000

Loss on Disposition of Building / Land = $ 102,000 Loss

Gain on restructuring of Debts = $ 205,000 Gain

ekkarill92 answered 2 years ago
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