Down Company has an overdue Notes Payable to City Bank of P8,000,000 and recorded accrued interest of P640,000 based on 8% interest rate. This rate of interest is presumed to be the market rate at the time of debt restructuring. As a result of a settlement on December 31, 2012, City Bank agreed to these restructuring arrangements: reduce the principal obligation to P6,000,000; forgive the P640,000 accrued interest; extend the maturity date to December 31, 2014; and annual interest of 10% is to be paid on December 31, 2013 and 2014.What is Down Company’s gain on debt restructuring? (Round off present value factors to four decimal places) a. P 2,640,000 b. P 2,426,220 c. P 1,440,000 d. P 0
Down Company has an overdue Notes Payable to City Bank of P8,000,000 and recorded accrued interest of P640,000 based on 8% interest rate. This rate of interest is presumed to be the market rate at the time of debt restructuring. As a result of a settlement on December 31, 2012, City Bank agreed to these restructuring arrangements: reduce the principal obligation to P6,000,000; forgive the P640,000 accrued interest; extend the maturity date to December 31, 2014; and annual interest of 10% is to be paid on December 31, 2013 and 2014.What is Down Company’s gain on debt restructuring? (Round off present value factors to four decimal places) a. P 2,640,000 b. P 2,426,220 c. P 1,440,000 d. P 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Down Company has an overdue Notes Payable to City Bank of P8,000,000 and recorded accrued interest of P640,000 based on 8% interest rate. This rate of interest is presumed to be the market rate at the time of debt restructuring. As a result of a settlement on December 31, 2012, City Bank agreed to these restructuring arrangements: reduce the principal obligation to P6,000,000; forgive the P640,000 accrued interest; extend the maturity date to December 31, 2014; and annual interest of 10% is to be paid on December 31, 2013 and 2014.What is Down Company’s gain on debt restructuring? (Round off present value factors to four decimal places)
a. P 2,640,000
b. P 2,426,220
c. P 1,440,000
d. P 0
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