Due to extreme financial difficulties, Armada Company has negotiated a restructuring of its 10% P5,000,000 note payable due on December 31, 2021. The unpaid interest on the note on such date is P500,000. The creditor has agreed to reduce the face value to P4,000,000, forgive the unpaid interest, reduce the interest rate to 8% and extend the due date three years from December 31, 2021.
Due to extreme financial difficulties, Armada Company has negotiated a restructuring of its 10% P5,000,000 note payable due on December 31, 2021. The unpaid interest on the note on such date is P500,000. The creditor has agreed to reduce the face value to P4,000,000, forgive the unpaid interest, reduce the interest rate to 8% and extend the due date three years from December 31, 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Due to extreme financial difficulties, Armada Company has negotiated a restructuring of its 10% P5,000,000 note payable due on December 31, 2021. The unpaid interest on the note on such date is P500,000. The creditor has agreed to reduce the face value to P4,000,000, forgive the unpaid interest, reduce the interest rate to 8% and extend the due date three years from December 31, 2021.
1. What is the interest expense for 2022?
2. What amount should Armada Company report as gain (loss) on extinguishment of debt in 2021?
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