Reference no: EM133021608

Problem - On December 31, 2021, Mocha Company was indebted to Melon Co. On a P2,000,000, 10% note. Only interest had been paid to date. Due to its financial difficulties, Mocha Company has negotiated a restructuring of its notes payable. The parties agreed that Mocha Company would settle the debt on the following terms:

Settle one-half of the note by transferring land with a recorded value of P800,000 and a fair value of P900,000.

Settle one-fourth of the note by transferring 200,000 shares of P1 par ordinary shares with a fair value of P1.80 per share.

Modify the terms of the remaining one-fourth of the note by reducing the interest rate to 5%, extend the due date three years from the date of restructuring and reducing the principal to P300,000.

Required -

Compute the total gains on extinguishment of debt to be recognized in profit or loss?

Compute the interest expense in 2022?

Compute the carrying amount of the note payable as of December 31, 2022?