On January 1, 2020, Granada Company had an overdue 10% note payable to First Bank at P8,000,000 and accrued interest of P800,000. As a result of a restructuring agreement on January 1, 2020, First Bank agreed to the following provisions: . The principal obligation is reduced to P6,000,000. . The accrued interest of P800,000 is forgiven. • The date of maturity is extended to December 31, 2023. . Annual interest of 12% is to be 'paid for 4 years every December 31. The present value of 1 at 10% for 4 periods is 0.683 and the present value of an ordinary annuity of 1 at 10% for 4 periods is 3.17. 1. What is the present value of the new note payable on January 1, 2020? a. 6,380,400 b. 6,000,000 . c. 4,098,000 d. 5,464,000 2. What is the gain on extinguishment of debt to be recognized for 2020? a. 2,000,000 b. 2,800,000 c. 2,419,600 d. 1,619,600 3. What is the interest expense to be recognized for 2020? a. 720,000 b. 800,000 c. 600,000 d. 638,040
On January 1, 2020, Granada Company had an overdue 10% note payable to First Bank at P8,000,000 and accrued interest of P800,000. As a result of a restructuring agreement on January 1, 2020, First Bank agreed to the following provisions: . The principal obligation is reduced to P6,000,000. . The accrued interest of P800,000 is forgiven. • The date of maturity is extended to December 31, 2023. . Annual interest of 12% is to be 'paid for 4 years every December 31. The present value of 1 at 10% for 4 periods is 0.683 and the present value of an ordinary annuity of 1 at 10% for 4 periods is 3.17. 1. What is the present value of the new note payable on January 1, 2020? a. 6,380,400 b. 6,000,000 . c. 4,098,000 d. 5,464,000 2. What is the gain on extinguishment of debt to be recognized for 2020? a. 2,000,000 b. 2,800,000 c. 2,419,600 d. 1,619,600 3. What is the interest expense to be recognized for 2020? a. 720,000 b. 800,000 c. 600,000 d. 638,040
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 30E
Related questions
Question
![On January 1, 2020, Granada Company had an overdue 10%
note payable to First Bank at P8,000,000 and accrued interest
of P800,000.
As a result of a restructuring agreement on January 1, 2020,
First Bank agreed to the fołlowing provisions:
. The principal obligation is reduced to P6,000,000.
. The accrued interest of P800,000 is forgiven.
• The date of maturity is extended to December 31, 2023.
. Annual interest of 12% is to be paid for 4 years every
December 31.
The present value of 1 at 10% for 4 periods is 0.683 and the
present value of an ordinary annuity of 1 at 10% for 4 periods
is 3.17.
1. What is the present value of the new note payable on
January 1, 2020?
a. 6,380,400
b. 6,000,000 .
c. 4,098,000
d. 5,464,000
2. What is the gain on extinguishment of debt to be
recognized for 2020?
a. 2,000,000
b. 2,800,000
c. 2,419,600
d. 1,619,600
3. What is the interest expense to be recognized for 2020?
a. 720,000
b. 800,000
c. 600,000
d. 638,040](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3b0935a7-4718-4e27-a94d-96eff32b4306%2F231ad942-7ae8-45fe-9b09-fc668202c8ff%2F3gpekh7_processed.png&w=3840&q=75)
Transcribed Image Text:On January 1, 2020, Granada Company had an overdue 10%
note payable to First Bank at P8,000,000 and accrued interest
of P800,000.
As a result of a restructuring agreement on January 1, 2020,
First Bank agreed to the fołlowing provisions:
. The principal obligation is reduced to P6,000,000.
. The accrued interest of P800,000 is forgiven.
• The date of maturity is extended to December 31, 2023.
. Annual interest of 12% is to be paid for 4 years every
December 31.
The present value of 1 at 10% for 4 periods is 0.683 and the
present value of an ordinary annuity of 1 at 10% for 4 periods
is 3.17.
1. What is the present value of the new note payable on
January 1, 2020?
a. 6,380,400
b. 6,000,000 .
c. 4,098,000
d. 5,464,000
2. What is the gain on extinguishment of debt to be
recognized for 2020?
a. 2,000,000
b. 2,800,000
c. 2,419,600
d. 1,619,600
3. What is the interest expense to be recognized for 2020?
a. 720,000
b. 800,000
c. 600,000
d. 638,040
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