Reference no: EM132778269

Problem 1: Anna Co., one of Zoren Co.'s credit customers, is experiencing financial difficulties and a downward trend in its financial performance. The firm is unable to service its debts and as a result has missed the payment of its note and accrued interest with Zoren Co. The principal amount of the note is P500,000 (which is already due) with annual interest of 10% payable annually. Accrued interest balance at December 31, 2019 is P50,000. Anna Co. management has negotiated a modification of its debt terms with Zoren Co. and agreed to these new terms: A. Forgive the accrued interest at December 31, 2019 B. Extend the payment of the principal for two years C. Reduce the interest rate (payable annually) to 8%. How much impairment loss should be recognized by Zoren Co. on December 31, 2019?