A few years ago, AFM had also invested in an investment company, Loozing LeadR Inc. [LLI]....

  

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A few years ago, AFM had also invested in an investment company, Loozing LeadR Inc. [LLI]. For a while it functioned profitable but recently it has fallen on some hard times. LLI approaches its creditor, The Bank Of Space to seek some concessions for its total debt coming due on December 31, 2019. The bank is holding a 10- year, 15% note for $1,500,000 which was issued at par plus the accrued interest of $225,000. LLI is negotiating for terms whereby the creditor would forgive the amount of the accrued interest. It also wants the creditor to lower the interest rate to 6%, reduce the maturity value of the note to $900,000 and extend the term of the 4 note by 7 years. The bank agrees to most of these terms. However, LLI will have to pay a cash amount of $504,000 on December 31, 2019; and the bank agrees to extend the maturity date of the note by four years only. The market rate on December 31, 2019 is 12%. Both parties have adopted IFRS. The information relates to Questions [54] to [56]. [54] The determination of whether this re-financing is a major- settlement or minor-modification restructure will involve comparing a value of new debt and payments assumed with the net amount of the obligation forgiven. These amounts, as calculated respectively, will be: [54] The determination of whether this re-financing is a major- settlement or minor-modification restructure will involve comparing a value of new debt and payments assumed with the net amount of the obligation forgiven. These amounts, as calculated respectively, will be: Select one: O a. $1,239,985; and $1,725,000 O b. $1,172,744; and $1,725,000 c. $668,744; and $1,500,000 O d. $1,239,985; $1,500,000 e. None of the above A few years ago, AFM had also invested in an investment company, Loozing LeadR Inc. [LLI]. For a while it functioned profitable but recently it has fallen on some hard times. LLI approaches its creditor, The Bank Of Space to seek some concessions for its total debt coming due on December 31, 2019. The bank is holding a 10- year, 15% note for $1,500,000 which was issued at par plus the accrued interest of $225,000. LLI is negotiating for terms whereby the creditor would forgive the amount of the accrued interest. It also wants the creditor to lower the interest rate to 6%, reduce the maturity value of the note to $900,000 and extend the term of the 4 note by 7 years. The bank agrees to most of these terms. However, LLI will have to pay a cash amount of $504,000 on December 31, 2019; and the bank agrees to extend the maturity date of the note by four years only. The market rate on December 31, 2019 is 12%. Both parties have adopted IFRS. The information relates to Questions [54] to [56]. [54] The determination of whether this re-financing is a major- settlement or minor-modification restructure will involve comparing a value of new debt and payments assumed with the net amount of the obligation forgiven. These amounts, as calculated respectively, will be: [54] The determination of whether this re-financing is a major- settlement or minor-modification restructure will involve comparing a value of new debt and payments assumed with the net amount of the obligation forgiven. These amounts, as calculated respectively, will be: Select one: O a. $1,239,985; and $1,725,000 O b. $1,172,744; and $1,725,000 c. $668,744; and $1,500,000 O d. $1,239,985; $1,500,000 e. None of the above

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The solution that you are looking for is option d which is 1239985 and 1500000 A comparison of the v... View the full answer