On December 31, 2021, LOL Company is experiencing extreme financial pressure and is in default in meeting interest payment on its long-term note of P7,000,000 due on December 31, 2021. The interest rate is 10% payable every December 31. In an agreement with the creditor, LOL obtained the following changes in the terms of the note: * The accrued interest of P700,000 on December 31, 2021 is forgiven. The principal is reduced by P1,000,000. * The new interest rate is 8%. The new date of maturity is December 31, 2026. At the time of restructuring, the market rate of interest was 10%. What is LOL Company's gain on debt restructuring?
On December 31, 2021, LOL Company is experiencing extreme financial pressure and is in default in meeting interest payment on its long-term note of P7,000,000 due on December 31, 2021. The interest rate is 10% payable every December 31. In an agreement with the creditor, LOL obtained the following changes in the terms of the note: * The accrued interest of P700,000 on December 31, 2021 is forgiven. The principal is reduced by P1,000,000. * The new interest rate is 8%. The new date of maturity is December 31, 2026. At the time of restructuring, the market rate of interest was 10%. What is LOL Company's gain on debt restructuring?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On December 31, 2021, LOL Company is experiencing extreme financial pressure and is in default in meeting interest payment on its long-term note of P7,000,000 due on December 31, 2021. The interest rate is 10% payable every December 31.
In an agreement with the creditor, LOL obtained the following changes in the terms of the note:
* The accrued interest of P700,000 on December 31, 2021 is forgiven. The principal is reduced by P1,000,000.
*
The new interest rate is 8%.
The new date of maturity is December 31, 2026.
At the time of restructuring, the market rate of interest was 10%.
What is LOL Company's gain on debt restructuring?
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