A. 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: The gain recognized arising from the debt restructuring by way of a "modification of terms" is