QUELL Co. owes PUT DOWN Bank F4,000,000 plus accrued interest of P360,000. The unamortized discount on the loan is P80,000. The debt is a 10-year, 12% loan. During 20x1, QUELL's business deteriorated due to loss of demand for its services. On December 31, 20x1, PUT DOWN Bank agrees to accept old equipment and cancel the entire debt. The equipment has a cost of P12,000,000, accumulated depreciation of P8,800,000, and fair value of P3,600,000. How much is the gain (loss) on the extinguishment of the debt? a. 1,800,000 b. 760,000 c. (1,800,000) d. 1,080,000
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
a. 1,800,000
b. 760,000
c. (1,800,000)
d. 1,080,000
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