PROBLEM 9-18

of P800,000 Problem 9-18 (AICPA Adapted) On January 1, 2020, Granada Company had an overdus 10% note payable to First Bank at P8,000,000 and accrued interest As a result of a restructuring agreement on January 1, 2020, First Bank agreed to the following provisions: The principal obligation is reduced to P6,000,000. The accrued interest of P800,000 is forgiven. Annual interest of 12% is to be paid for 4 years every The date of maturity is extended to December 31, 2023. The present value of 1 at 10% for 4 periods is 0.683 and the present value of an ordinary annuity of 1 at 10% for 4 periods December 31 is 3.17. 1. What is the present value of the new note payable on January 1, 2020? a. 6,380,400 b. 6,000,000 C. 4,098,000 d. 5,464,000 2. What is the gain on extinguishment of debt to be recognized for 2020? a. 2,000,000 b. 2,800,000 c. 2,419,600 d. 1,619,600 3. What is the interest expense to be recognized for 2020? a. 720,000 b. 800,000 c. 600,000 d. 638,040 327