a. how much should TRUE recognize as gain or loss on extinguishment? b. how much should TRUE recognize as interest expense for the year ended, December 31, 2021? Due to the covid-19 pandemic, TRUE has experienced extreme financial pressure and has been in default in meetinginterest payment on a long term note of P6,000,000 due on October 1, 2021. The interest rate is 12% payable everyOctober 1. The accrued interest payable on October 1, 2020 is #720,000. In an agreement with PITY, the creditor, theentity obtained the following changes in the terms of note:The accrued interest on October 1, 2020 is forgivenThe principal is reduced by P500,000The new interest rate is 9% payable every October 1The new date of maturity is October 1, 2025The present values are as follow:@ 9%@ 12%PV of 1 for 5 periods0.64990.5674PV of an ordinary annuity for 5 periods3.88973.6048

Working note: Computation of fair value of note after the changes in terms: Fair value of…

Due to the covid-19 pandemic, TRUE has experienced extreme financial pressure and has been in default in meeting interest payment on a long term note of P6,000,000 due on October 1, 2021. The interest rate is 12% payable every October 1. The accrued interest payable on October 1, 2020 is #P720,000. In an agreement with PITY, the creditor, the entity obtained the following changes in the terms of note: The accrued interest on October 1, 2020 is forgiven V The principal is reduced by P500,000 The new interest rate is 9% payable every October 1 The new date of maturity is October 1, 2025 The present values are as follow: @ 9% @ 12% PV of 1 for 5 periods PV of an ordinary annuity for 5 periods 0.6499 0.5674 3.8897 3.6048

Due to the covid-19 pandemic, TRUE has experienced extreme financial pressure and has been in default in meeting interest payment on a long term note of P6,000,000 due on October 1, 2021. The interest rate is 12% payable every October 1. The accrued interest payable on October 1, 2020 is #P720,000. In an agreement with PITY, the creditor, the entity obtained the following changes in the terms of note: The accrued interest on October 1, 2020 is forgiven V The principal is reduced by P500,000 The new interest rate is 9% payable every October 1 The new date of maturity is October 1, 2025 The present values are as follow: @ 9% @ 12% PV of 1 for 5 periods PV of an ordinary annuity for 5 periods 0.6499 0.5674 3.8897 3.6048

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 16Q: Angelos Outlet used to report bad debt using the balance sheet method and is now switching to the...

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