On December 31, 2011, Gorilla Company was experiencing financial difficulties and entered into a debt restructuring agreement with the creditor. The creditor restructured the obligation as follows: The principal was reduced from P10,000,000 to P9,800,000 • Forgave the accrued interest of P1,200,000. Extended the maturity date from December 31, 2011 to December 31, 2014. • Reduced the interest from 12% to 10%. Interest is payable on December 31, 2012, 2013 and 2014. How much should the creditor report as loss on debt restructuring? (Ignore income taxes and carry present value factors to 5 decimal places.)
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
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