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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
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
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
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education