Due to extreme financial difficulties Cloud Company negotiated to restructure its 10%, P5,000,000 note obligation maturing on
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Question:
Due to extreme financial difficulties Cloud Company negotiated to restructure its 10%, P5,000,000 note obligation maturing on December 31, 2021. The following modifications are to be applied in relation to the debt restructuring agreement as approved by Nimbus Financing:
- Waiver of the unpaid interest amounting to P500,000
- Reduction of the principal amount to P4,000,000
- Reduction of the original interest rate to 8%
- Extension of the due date three years from December 31, 2021
Present value of P1 @ 10% for three periods is 0.75;
Present value of an ordinary annuity of P1 @ 10% for three periods 2.49
Question:
1) The gain recognized arising from the debt restructuring by way of a "modification of terms"
Related Book For
Intermediate Accounting IFRS
ISBN: 9781119607519
4th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
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