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, 2024, City bank agreed to the following restructuring arrangements: • Reduced the principal obligation to P6,000,000. • Forgave the P640,000 accrued interest. • Extended the maturity date to December 31, 2025. • Annual Interest of 10% is to be paid on December 31, 2025 and 2026. The market rate of interest for similar debt on December 31, 2024 is 8%.