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What is the gain on extinguishment of the note payable?

What is the gain on extinguishment of the note payable?

FINANCIAL ACCOUNTING
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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Christian Co. is threatened with bankruptcy due to its inability to meet interest payments and fund requirements to retire P6,000,000 note payable with accrued interest payable of P600,000. Christian Co. has entered into an agreement with the creditor to exchange equity instruments for financial liability. Christian has an option to exchange 300,000 ordinary shares with P5 par value and PI0 market value, and 25,000 preference shares with P10 par value and P60 market value. The fair market value of the financial liability is P5,200,000 and the carrying amount is P5,800,000. What is the gain on extinguishment of the note payable? O a po Ob. P2,100,000 O C PLA00.000 Od PL500,000
Transcribed Image Text:Christian Co. is threatened with bankruptcy due to its inability to meet interest payments and fund requirements to retire P6,000,000 note payable with accrued interest payable of P600,000. Christian Co. has entered into an agreement with the creditor to exchange equity instruments for financial liability. Christian has an option to exchange 300,000 ordinary shares with P5 par value and PI0 market value, and 25,000 preference shares with P10 par value and P60 market value. The fair market value of the financial liability is P5,200,000 and the carrying amount is P5,800,000. What is the gain on extinguishment of the note payable? O a po Ob. P2,100,000 O C PLA00.000 Od PL500,000
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