On December 31, 2020, the Reliable 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. Reliable 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) * O P1,576,800 O P1,076,800 O P1,623,000 O P1,123,200
On December 31, 2020, the Reliable 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. Reliable 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) * O P1,576,800 O P1,076,800 O P1,623,000 O P1,123,200
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:On December 31, 2020, the Reliable 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, Reliable
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) *
O P1,576,800
O P1,076,800
O P1,623,000
O P1,123,200
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