Question
Due to adverse economic circumstances and poor management, Resilient Company has negotiated a restructuring of its 9% P6,000,000 note payable to Prime Bank due on
Due to adverse economic circumstances and poor management, Resilient Company has negotiated a restructuring of its 9% P6,000,000 note payable to Prime Bank due on January 1, 2020. There is no accrued interest on the note.
The bank has reduced the principal obligation from P6,000,000 to P5,500,000 and extend the maturity to 3 years or on December 31, 2022. However, the new interest rate is 12% payable annually every December 31.
The present value of 1 at 9% for three periods is .7722 and the present value of an ordinary annuity of 1 at 9% for three periods is 2.5313.
How much is the gain/(loss) related to debt restructuring?
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