On December 31, 2021, the VKS Finance Company had a P3,000,000 note receivable from JP Company. The note bears 10% interest. The books reported accrued interest of P300,000 on this date. Because of financial distress suffered by JP Company, VKS Finance agreed to the restructuring and modification of the terms as follows: (1) Reduction of principal to P2,000,000; (2) Reduction of interest to 7% payable annually beginning December 31, 2022;

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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On December 31, 2021, the VKS Finance Company had a P3,000,000 note receivable from JP Company. The note bears 10% interest. The books reported accrued interest of P300,000 on this date. Because of financial distress suffered by JP Company, VKS Finance agreed to the restructuring and modification of the terms as follows:

(1) Reduction of principal to P2,000,000;

(2) Reduction of interest to 7% payable annually beginning December 31, 2022;

(3) Accrued interest on December 31, 2021 is condoned; and

(4) Principal payment was reset to December 31, 2024.

 
How much impairment loss should VKS Finance Company record on December 31, 2021 as a result of restructuring? Round off present value figures to two decimal places.

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