How much was the total gain on extinguishment of debt

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Reference no: EM132806877

Problem - On December 31, 2010 a company was indebted to Creditor Co. on a P2,000,000 10% note. Only interest had been paid to date. Due to its financial difficulties, the company has negotiated a restructuring of its note payable. The parties agreed that the company would settle the debt on the following terms:

settle 1/2 of the note by transferring land with a recorded value of P800,000 and a fair value of P900,000

settle 1/4 of the note by transferring 200,000 shares of P1 par ordinary shares with a fair market value of P15 per share

modify the terms of the remaining 1/4 of the note by reducing the interest rate to 5%, extend the due date 3 years from the date of restructuring and reducing the principal to P300,000.

How much was the (1) total gain on extinguishment of debt and (2) carrying amount of the note payable as of December 31, 2021?

Reference no: EM132806877

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