Reference no: EM132791314

Question 1 - On January 1, 2016, Granada Company First Bank has an overdue 10% note payable to at PhP8,000,000 and accrued interest of PhP800,000.

As a result of a restructuring agreement on January 1, 2016, First Bank agreed to the following amendments:

The principal is reduced to PhP6,000,000;

Accrued interest of PhP800,000 is forgiven;

Maturity date is extended to December 31, 2019;

Annual interest of 12% is to be paid for 4 years every December31.

The present value of 1 at 10% for 4 periods is 0.683, and the present value of an ordinary annuity of 1 at 10% for 4 periods is 3.17. What is the gain on debt extinguishment to be recognized for 2016?

Question 2 - Ramsay Corporation has long owned a manufacturing site that has now been discovered to be contaminated with toxic waste. The entity has acknowledged its responsibility for the contamination. An initial clean up feasibility study has shown that it will cost at least PhP500,000 to clean up the toxic waste. During the current year, Ramsay has been sued for patent infringement and lost the case. A preliminary judgment of PhP300,000 was issued and is under appeal. The entity's attorneys agree that it is probable that Ramsay will lose this appeal. What amount of provision should be accrued as liability?