Lesson 9: Debt Restructure On January 1, 2021, Granada Company had an overdue 10% note payable...

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Lesson 9: Debt Restructure On January 1, 2021, Granada Company had an overdue 10% note payable to First Bank at P8,000,000 and accrued interest payable of P800,000. As a result of a restructuring agreement on January 1, 2021, First Bank agreed to the following provisions: ● ● The principal obligation is reduced to P6,000,000. The accrued interest of P800,000 is forgiven. The date of maturity is extended to December 31, 2024 Annual interest of 12% is to be paid for 4 years every December 31. The present value of 1 at 10% for 4 periods is 0.68 and the present value of an ordinary annuity of 1 at 10% for 4 periods. is 3.17. The market rate of interest for similar note is 9 %. The PV of 1 at 9% for 4 periods is .71 and the PV of an ordinary annuity of 1 at 9% for 4 periods is 3.24. What amount should be reported as present value of the new note payable on January 1, 2021? What amount should be reported as gain on extinguishment of debt for 2021? What amount should be reported as interest expense for 2021? Lesson 9: Debt Restructure On January 1, 2021, Granada Company had an overdue 10% note payable to First Bank at P8,000,000 and accrued interest payable of P800,000. As a result of a restructuring agreement on January 1, 2021, First Bank agreed to the following provisions: ● ● The principal obligation is reduced to P6,000,000. The accrued interest of P800,000 is forgiven. The date of maturity is extended to December 31, 2024 Annual interest of 12% is to be paid for 4 years every December 31. The present value of 1 at 10% for 4 periods is 0.68 and the present value of an ordinary annuity of 1 at 10% for 4 periods. is 3.17. The market rate of interest for similar note is 9 %. The PV of 1 at 9% for 4 periods is .71 and the PV of an ordinary annuity of 1 at 9% for 4 periods is 3.24. What amount should be reported as present value of the new note payable on January 1, 2021? What amount should be reported as gain on extinguishment of debt for 2021? What amount should be reported as interest expense for 2021?

Answer rating: 100% (QA)

Step 1 It is assumed that 10 rate is the market interest rate Interest payable at 12 on new note 600... View the full answer