45. A company has an overdue 10% note payable to Filipino Bank amounting to P8,000,000 with accrued interest of P800,000 as of December 31, 2021. During the same date, the bank agreed to the following restructuring agreement:Reduce the principal obligation to P6,000,000.Waive the P800,000 accrued interest.Extend the maturity date to December 31, 2023.Annual interest of 8% of the new principal is to be paid on December 31, 2022 and 2023. The prevailing market interest rate on December 31, 2021 is 10%. How much is the gain on debt restructuring?

Debt Restructuring - It is an event under which debtor is in financial difficulty and creditors…

Answered: A company has an overdue 10% note…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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45.

A company has an overdue 10% note payable to Filipino Bank amounting to P8,000,000 with accrued interest of P800,000 as of December 31, 2021. During the same date, the bank agreed to the following restructuring agreement:

Reduce the principal obligation to P6,000,000.
Waive the P800,000 accrued interest.
Extend the maturity date to December 31, 2023.
Annual interest of 8% of the new principal is to be paid on December 31, 2022 and 2023.

The prevailing market interest rate on December 31, 2021 is 10%. How much is the gain on debt restructuring?

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