Problem 9-18 (AICPA Adapted)On January 1, 2021, Granada Company had an overdue 10%note payable to First Bank at P8,000,000 and accrued interestpayable of P800,000.As a result of a restructuring agreement on January 1, 2021,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, 2024.Annual interest of 12% is to be paid for 4 years everyDecember 31.The present value of 1 at 10% for 4 periods is 0.68 and thepresent value of an ordinary annuity of 1 at 10% for 4 periodsis 3.17.The market rate of interest for similar note is 9%. The PV of1 at 9% for 4 periods is .71 and the PV of an ordinary annuityof 1 at 9% for 4 periods is 3.24. ·1. What amount should be reported as present value of thenew note payable on January 1, 2021?.а. 6,592,800b. 6,000,000c. 6,362,400d. 4,260,0002. What amount should be reported as gain onextinguishment of debt for 2021?а. 2,000,000b. 2,800,000c. 2,207,200d. 2,437,6003. What amount should be reported as interest expense for2021?a. 720,000b. 659,280c. 636,240d. 593,352

Present value of the new note payable on Jan 1, 2021 = Interest payment × PV of ordinary annuity at…

ted) note payable to First Bank at P8,000,000 and accrued interest On January 1, 2021, Granada Company had an overdue 10% payable of P800,000. As a result of a restructuring agreement on January 1, 202, Birst 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, 2024. Annual interest of 12% is to be paid for 4 years every December 31.

ted) note payable to First Bank at P8,000,000 and accrued interest On January 1, 2021, Granada Company had an overdue 10% payable of P800,000. As a result of a restructuring agreement on January 1, 202, Birst 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, 2024. Annual interest of 12% is to be paid for 4 years every December 31.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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