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Prepare the entry record the debt restructuring

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Question - Colt Company is indebted to Kent Company under an P8,000,000, 10% 4 - year note dated December 31, 2018. The interest of P800,000 was paid on December 31, 2019 and 2020.

During 2021, Colt Company experienced financial difficulties and is likely to default unless concessions are made. On December 31, 2021 Kent Company agreed to restructuring the debt as follows:

a. Interest of P800,000 for 2021, due December 31, 2021 was made payable December 31, 2022.

b. Interest for 2022 was waived.

c. The principal amount was reduced to P7,000,000.

Required - Prepare the entry record the debt restructuring on the books Colt Company?

Reference no: EM132757967

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