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Compute the gain that will be reported by bdo bank

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Reference no: EM132647001

On December 31, 2020, BDO Bank agreed to restructure an P800,000, 10% loan receivable from Richard Corporation because of Richard's financial problems. The loan was issued at par and at December 31, there was P40,000 of accrued interest for a six-month period.

Terms of the restructuring agreement are as follows:

Reduce the loan from P800,000 to P600,000;

Extend the maturity date by 2 years from December 31, 2020 to December 31, 2022; and, Reduce the interest rate on the loan from 10% to 6%.

Required:

Question 1. What amount of gain or loss from restructuring the loan will Richard report for 2020?

Question 2. Compute the gain or loss that will be reported by BDO Bank. Assume that the bank has not recognized an impairment before the restructuring.

Reference no: EM132647001

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