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Compute the present value of the new liability

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Reference no: EM133171211

Question - Due to adverse economic circumstances and poor management, NN Company had negotiated a restructuring of a 9%, P6,000,000 note payable to a bank on January 1, 2020. There was no accrued interest on the note on January 1, 2020. The bank reduced the principal obligation from P0000000 to P5,000.000 and extended the maturity to three years on December 31, 2022. However, the new interest rate is 13%, payable annually every December 31.

Compute the present value of the new liability.

Compute the gain/loss on extinguishment of debt to be recognized in 2020, if any.

Reference no: EM133171211

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