On December 31, 2021, LoL Co. was indebted to Garena Street Company on a P2M, 10% note. Only interest had been paid to date. Due to its financial difficulties LoL has negotiated a restructuring of its notes payable. The parties agree that LoL would settle the debt on the following terms: • Settle one half of the note by transferring land with a recorded value of P800,000, and a fair value of P900,000. • Settle one fourth of the note by transferring 200,000 shares of P1 par ordinary shares with a fair value of P1.80 per share. • Modify the terms of the remaining one fourth of the note by reducing the interest to 5%, extend the due date three years from the date of restructuring and reducing the principal to P300,000. Total gains on the settlement of debt to be recognized in profit or loss is: A.P337,306 B.P340,000 C.P437,306 D.P577,306
On December 31, 2021, LoL Co. was indebted to Garena Street Company on a P2M, 10% note. Only interest had been paid to date. Due to its financial difficulties LoL has negotiated a restructuring of its notes payable. The parties agree that LoL would settle the debt on the following terms:
• Settle one half of the note by transferring land with a recorded value of P800,000, and a fair
value of P900,000.
• Settle one fourth of the note by transferring 200,000 shares of P1 par ordinary shares with a fair value of P1.80 per share.
• Modify the terms of the remaining one fourth of the note by reducing the interest to 5%, extend the due date three years from the date of restructuring and reducing the principal to P300,000.
Total gains on the settlement of debt to be recognized in profit or loss is:
A.P337,306
B.P340,000
C.P437,306
D.P577,306
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