management, Tagaytay Highlands Company had negotiateda restructuring of an 8% P6,000,000 note payable to SecondDue to adverse economic circumstances and poorBank due on January 1, 2021. There was no accrued interestBank due on January 1, 2021. There was no accrued intereston the note on January 1, 2021.The bank reduced the principal obligation from P6,000,000to P5,000,000 and extended the maturity to three years onDecember 31, 2023.However, the new stated interest rate is 12% payableannually every December 31.The present value of 1 at 8% for three periods is .79 and thepresent valuè of an ordinary annuity of 1 at 8% for threeperiods is 2.58.The market rate of interest is 10%. The PV of 1 at 10% for 3periods is 0.75 and the PV of an ordinary annuity of 1 at 10%for 3 periods is 2.49.1. What amount should be reported as present value of thenew note payable on January. 1, 2021?a. 6,000,000b. 5,000,000.c. 5,498,000d. 5,244,0002. What amount of gain on modification of debt should berecognized for 2021?756,000b.а.600,000502,000d.с.3. What amount should be recognized as interest expensefor 2021 as a result of the modification?a. 600,000b. 480,000c. 439,840.d. 524,400

Debt Restructuring The term debt restructuring which are utilized by the organization to meet the…

a restructuring of an 8% P6,000,000 note payable to Second management, Tagaytay Highlands Company had negotiated Due to adverse economic circumstances and poor a restructuring of an 8% P6.000,000 note payable to Second Bank due on January 1, 2021. There was no accrued interest on the note on January 1, 2021. The bank reduced the principal obligation from P6,000,000 to P5,000,000 and extended the maturity to three years on December 31, 2023. However, the new stated interest rate is 12% payable annually every December 31. The present value of 1 at 8% for three periods is .79 and the present valuė of an ordinary annuity of 1 at 8% for three periods is 2.58. The market rate of interest is 10%. The PV of 1 at 10% for 3 periods is 0.75 and the PV of an ordinary annuity of 1 at 10% for 3 periods is 2.49. 1. What amount should be reported as present value of the new note payable on January 1, 2021? a. 6,000,000 b. 5,000,000. с. 5,498,000 d. 5,244,000 2. What amount of gain on modification of debt should be recognized for 2021? 756,000 b. 600,000 502,000 d. а. с. 3. What amount should be recognized as interest expense for 2021 as a result of the modification? a. 600,000 b. 480,000 c. 439,840 d. 524,400

a restructuring of an 8% P6,000,000 note payable to Second management, Tagaytay Highlands Company had negotiated Due to adverse economic circumstances and poor a restructuring of an 8% P6.000,000 note payable to Second Bank due on January 1, 2021. There was no accrued interest on the note on January 1, 2021. The bank reduced the principal obligation from P6,000,000 to P5,000,000 and extended the maturity to three years on December 31, 2023. However, the new stated interest rate is 12% payable annually every December 31. The present value of 1 at 8% for three periods is .79 and the present valuė of an ordinary annuity of 1 at 8% for three periods is 2.58. The market rate of interest is 10%. The PV of 1 at 10% for 3 periods is 0.75 and the PV of an ordinary annuity of 1 at 10% for 3 periods is 2.49. 1. What amount should be reported as present value of the new note payable on January 1, 2021? a. 6,000,000 b. 5,000,000. с. 5,498,000 d. 5,244,000 2. What amount of gain on modification of debt should be recognized for 2021? 756,000 b. 600,000 502,000 d. а. с. 3. What amount should be recognized as interest expense for 2021 as a result of the modification? a. 600,000 b. 480,000 c. 439,840 d. 524,400

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

management, Tagaytay Highlands Company had negotiated
a restructuring of an 8% P6,000,000 note payable to Second
Due to adverse economic circumstances and poor
Bank due on January 1, 2021. There was no accrued interest
Bank due on January 1, 2021. There was no accrued interest
on the note on January 1, 2021.
The bank reduced the principal obligation from P6,000,000
to P5,000,000 and extended the maturity to three years on
December 31, 2023.
However, the new stated interest rate is 12% payable
annually every December 31.
The present value of 1 at 8% for three periods is .79 and the
present valuè of an ordinary annuity of 1 at 8% for three
periods is 2.58.
The market rate of interest is 10%. The PV of 1 at 10% for 3
periods is 0.75 and the PV of an ordinary annuity of 1 at 10%
for 3 periods is 2.49.
1. What amount should be reported as present value of the
new note payable on January. 1, 2021?
a. 6,000,000
b. 5,000,000.
c. 5,498,000
d. 5,244,000
2. What amount of gain on modification of debt should be
recognized for 2021?
756,000
b.
а.
600,000
502,000
d.
с.
3. What amount should be recognized as interest expense
for 2021 as a result of the modification?
a. 600,000
b. 480,000
c. 439,840
.d. 524,400

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