Good Company has an overdue 8% notes payable to Better Company amounting to P8million and accrued interest for one year of P640,000. as a result of restructuring agreement on January 1, 2021, both parties agreed to the following provisions: * the principal obligation is reduced to P7,000,000 * the accrued interest is forgiven * the date of maturity is extended to December 31, 2024 * annual interest of 10% is to be paid in 4 years every December 31 The prevailing rate of interest remained at 8%. The PV of 1 at 8% for 4 periods is 0.735 and the PV of an ordinary annuity of 1 at 8% for 4 periods is 3.31. How much is the gain on debt restructuring? a. P1,640,000 b. P1,178,000 c. P1,000,000 d. P538,000
Good Company has an overdue 8% notes payable to Better Company amounting to P8million and accrued interest for one year of P640,000. as a result of restructuring agreement on January 1, 2021, both parties agreed to the following provisions: * the principal obligation is reduced to P7,000,000 * the accrued interest is forgiven * the date of maturity is extended to December 31, 2024 * annual interest of 10% is to be paid in 4 years every December 31 The prevailing rate of interest remained at 8%. The PV of 1 at 8% for 4 periods is 0.735 and the PV of an ordinary annuity of 1 at 8% for 4 periods is 3.31. How much is the gain on debt restructuring? a. P1,640,000 b. P1,178,000 c. P1,000,000 d. P538,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Good Company has an overdue 8% notes payable to Better Company amounting to P8million and accrued interest for one year of P640,000. as a result of restructuring agreement on January 1, 2021, both parties agreed to the following provisions:
* the principal obligation is reduced to P7,000,000
* the accrued interest is forgiven
* the date of maturity is extended to December 31, 2024
* annual interest of 10% is to be paid in 4 years every December 31
The prevailing rate of interest remained at 8%. The PV of 1 at 8% for 4 periods is 0.735 and the PV of an ordinary annuity of 1 at 8% for 4 periods is 3.31. How much is the gain on debt restructuring?
a. P1,640,000
b. P1,178,000
c. P1,000,000
d. P538,000
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education