Provide the entry to record the modification of the loan

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Reference no: EM132913034

On Dec 31,20x1, an entity enters into a restructuring agreement to modify the terms of its existing loan as follows:

a.The principal is reduced from P2,800,000 to P2,500,000.

b. The lender waived the accrued interest of P400,000

c. The nominal rate is decreased from 14% to 9%.

d. The maturity date is extended from December 31,20x1 to January 1, 20x6.

The principal is due in lump sum at maturity date but interest is payable annually at each year end. The original effective interest rate is 14%. The prevailing rate on December 31, 20x1 is 12%.

Problem 1: Provide the entry to record the modification of the loan.

Reference no: EM132913034

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