Due to the covid-19 pandemic, TRUE has experienced extreme financial pressure and has been in default in meeting interest payment on a long term note of P6,000,000 due on October 1, 2021. The interest rate is 12% payable every October 1. The accrued interest payable on October 1, 2020 is P720,000. In an agreement with PITY, the creditor, the entity obtained the following changes in the terms of note: v The accrued interest on October 1, 2020 is forgiven v The principal is reduced by P500,000 v The new interest rate is 9% payable every October 1 The new date of maturity is October 1, 2025 The present values are as follow: @ 9% @ 12% PV of 1 for 5 periods 0.6499 0.5674 PV of an ordinary annuity for 5 periods 3.8897 3.6048

Due to the covid-19 pandemic, TRUE has experienced extreme financial pressure and has been in default in meeting interest payment on a long term note of P6,000,000 due on October 1, 2021. The interest rate is 12% payable every October 1. The accrued interest payable on October 1, 2020 is P720,000. In an agreement with PITY, the creditor, the entity obtained the following changes in the terms of note: v The accrued interest on October 1, 2020 is forgiven v The principal is reduced by P500,000 v The new interest rate is 9% payable every October 1 The new date of maturity is October 1, 2025 The present values are as follow: @ 9% @ 12% PV of 1 for 5 periods 0.6499 0.5674 PV of an ordinary annuity for 5 periods 3.8897 3.6048

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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