ABC Company is in financial difficulties and was not able to pay the 10% interest of P100,000 due on December 31, 2020 on its Mortgage Payable to a bank of P1,000,000. On January 1, 2021, ABC Company negotiated that its debt be restructured and the following were the details of the agreement: The interest due is forgiven. The principal will remain at P1,000,000 but will be paid on December 31, 2022 instead of the original date of December 31, 2020. Interest rate is increased to 11% from the original 10% per year. The present value of 1 at 10% for two periods is 0.8264 while the present value of an ordinary annuity of 1 at 10% for two periods is 1.7355. According to our standards, the amount of gain from extinguishment of debt that the company will recognize on this date is closest to?
ABC Company is in financial difficulties and was not able to pay the 10% interest of P100,000 due on December 31, 2020 on its Mortgage Payable to a bank of P1,000,000. On January 1, 2021, ABC Company negotiated that its debt be restructured and the following were the details of the agreement:
The interest due is forgiven.
The principal will remain at P1,000,000 but will be paid on December 31, 2022 instead of the original date of December 31, 2020.
Interest rate is increased to 11% from the original 10% per year.
The present value of 1 at 10% for two periods is 0.8264 while the present value of an ordinary annuity of 1 at 10% for two periods is 1.7355. According to our standards, the amount of gain from extinguishment of debt that the company will recognize on this date is closest to?
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