3. Down Company has an overdue Notes Payable to City Bank of P8,000,000 and recorded accrued interest of P640,000 based on 8% interest rate. This rate of interest is presumed to be the market rate at the time of debt restructuring. As a result of a settlement on December 31, 2012, City Bank agreed to these restructuring arrangements: reduce the principal obligation to P6,000,000; forgive the P640,000 accrued interest; extend the maturity date to December 31, 2014; and annual interest of 10% is to be paid on December 31, 2013 and 2014.What is Down Company's gain on debt restructuring? (Round off present value factors to four decimal places)
3. Down Company has an overdue Notes Payable to City Bank of P8,000,000 and recorded accrued interest of P640,000 based on 8% interest rate. This rate of interest is presumed to be the market rate at the time of debt restructuring. As a result of a settlement on December 31, 2012, City Bank agreed to these restructuring arrangements: reduce the principal obligation to P6,000,000; forgive the P640,000 accrued interest; extend the maturity date to December 31, 2014; and annual interest of 10% is to be paid on December 31, 2013 and 2014.What is Down Company's gain on debt restructuring? (Round off present value factors to four decimal places)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![3. Down Company has an
overdue Notes Payable to City
Bank of P8,000,000 and
recorded accrued interest of
P640,000 based on 8%
interest rate. This rate of
interest is presumed to be the
market rate at the time of debt
restructuring. As a result of a
settlement on December 31,
2012, City Bank agreed to
these restructuring
arrangements: reduce the
principal obligation to
P6,000,000; forgive the
P640,000 accrued interest;
extend the maturity date to
December 31, 2014; and annual
interest of 10% is to be paid on
December 31, 2013 and
2014.What is Down Company's
gain on debt restructuring?
(Round off present value
factors to four decimal places)
a. P 2,640,000
b. P 2,426,220
c. P 1,440,000
O d. PO](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4530d1e8-bfcd-4921-a840-e866079be199%2F967ac177-b630-4135-9a6c-20b6838a7a2a%2F0ph42ml_processed.jpeg&w=3840&q=75)
Transcribed Image Text:3. Down Company has an
overdue Notes Payable to City
Bank of P8,000,000 and
recorded accrued interest of
P640,000 based on 8%
interest rate. This rate of
interest is presumed to be the
market rate at the time of debt
restructuring. As a result of a
settlement on December 31,
2012, City Bank agreed to
these restructuring
arrangements: reduce the
principal obligation to
P6,000,000; forgive the
P640,000 accrued interest;
extend the maturity date to
December 31, 2014; and annual
interest of 10% is to be paid on
December 31, 2013 and
2014.What is Down Company's
gain on debt restructuring?
(Round off present value
factors to four decimal places)
a. P 2,640,000
b. P 2,426,220
c. P 1,440,000
O d. PO
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