Reference no: EM132867214
On December 31, 2020, MNO Company shows the following data with respect to its matured obligation.
Notes Payable P10,000,000
Accrued Interest Payable at 10% interest rate 1,000,000
The company is threatened with a court suit if it could not pay its maturing debt. Accordingly, the company enters into an agreement for the transfer of a non-cash asset in full settlement of the mortgage. The agreement provides for the transfer of equipment carried in the books of MNO at cost of P7,500,000 but with related accumulated depreciation to date of P2,812,500. The equipment has a current fair value of P4,500,000.
Problem 1: What amount of gain or loss on disposal of equipment or what amount of impairment loss on equipment is taken to profit or loss at the time of debt restructuring?
Problem 2: What amount of gain on debt restructuring is taken to profit or loss at the date of debt restructuring?
Problem 3: What net amount should MNO recognize in profit or loss for the year ended December 31,2020 as a result of this transaction?