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Prepare journal entries for record the modification

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Grey Company has an overdue 8% note payable to City Bank at P8,000,000 and recorded accrued interest of P640,000. As a result of a settlement on January 1, 2017, City Bank agreed to the following restructuring agreement:

a. Reduced the principal obligation to P7,000,000.

b. Forgave the P640,000 accrued interest.

c. Extended the maturity date to December 31, 2018.

d. Annual interest of 10% is to be paid on December 31, 2017 and 2018.

The present value of 1 at 8% for two periods is 0.8573, and the present value of an ordinary annuity of 1 at 8% for two periods is 1.7833.

Question 1: Prepare journal entries for 2017 and 2018 to record the modification of terms

Reference no: EM132587471

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