PROBLEM A: Alvaro Company is in financial trouble and could not meet maturing installments and interest on its bank loan of P10,000,000. The accrued interest on the loan to date is P1,200,000. The bank has agreed to the settlement of the loan in exchange for land with market value of P9,000,000. The land is carried in the books of Alvaro Company at P8.200,000. 1. Under IFRS, how much should Alvaro Company recognize as gain on extinguishment of debt? PROBLEM B: Morte Company showed the following data with respect to a currently maturing obligation: Notes payable P1,000,000 Accrued interest 80,000 payable The company is threatened with a court suit if it could not pay its maturing debt. Accordingly, the company entered into an agreement with the creditor for the issuance of share capital in full settlement of the note. The agreement provided for the issue of 20,000 shares with par value of P30. These shares are currently quoted at P45. The fair value of the liability is P950,000. 3. 2. How much should Morte Company recognize as gain on extinguishment of debt? Assuming the quoted price of the shares is unavailable, how much should Morte Company recognize as share premium arising from issuance of shares? 4. Assuming both the quoted price of the shares and the fair value of the liability are unavailable, how much should Morte Company recognize as gain on extinguishment of debt? PROBLEM C: On January 1, 2020, Esther Company is experiencing financial difficulties and is in default in meeting interest payment on a long-term note of P30,000,000 due on December 31, 2021. The interest rate is 12% payable every December 31. The accrued interest payable on January 1, 2020 is P3,600,000. In an agreement with the creditor, the company obtained the following modifications in the terms of the note: The accrued interest on january 1, 2020 is waived. The principal amount is reduced by 10%. The new interest rate is 8% payable every 31. The new date of maturity is December 31, 2023. 5. What is the present value of the modified note payable on January 1, 2020? What is the gain on modification of debt to be recognized for 2020