On December 31, 2020, the Bato-bato Finance Company had P5,000,000 notes receivable from Burgundy Company. The note bears 10% interest. The books reported accrued interest of P500,000 in this date. Because of financial distress being suffered by Burgundy, Bato-bato Finance agreed to the restructuring and modification of terms of its loan to Burgundy as follows: • Reduction of principal to P4,000,000; • Reduction of interest to 8% payable annually beginning December 31, 2021; • Accrued interest on December 31, 2020 is condoned and • Principal payment was reset to December 31, 2022. How much is the impairment loss on December 31, 2020 as a result of restructuring? (Use two-decimal places for the PV factor).
On December 31, 2020, the Bato-bato Finance Company had P5,000,000 notes receivable from Burgundy Company. The note bears 10% interest. The books reported accrued interest of P500,000 in this date. Because of financial distress being suffered by Burgundy, Bato-bato Finance agreed to the restructuring and modification of terms of its loan to Burgundy as follows:
• Reduction of principal to P4,000,000;
• Reduction of interest to 8% payable annually beginning December 31, 2021;
• Accrued interest on December 31, 2020 is condoned and
• Principal payment was reset to December 31, 2022.
How much is the impairment loss on December 31, 2020 as a result of restructuring? (Use two-decimal places for the PV factor).
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