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What is guimary corporation gain on debt restructuring

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Reference no: EM132577967

On December 31, 2015, Guimary Corporation is experiencing extreme financial pressure and is in default in meeting interest payment on its long-term note of P6, 000, 000 due on December 31, 2015.

The interest rate is 10% payable every December 31.

In an agreement with the creditor, Guimary Corporation obtained the following changes in the terms of the note:

  • The accrued interest of P600, 000 on December 31, 2015 is forgiven.
  • The principal is reduced by P1, 000, 000.
  • The new interest rate is 12%
  • The new date of maturity is December 31, 2020.

Question 1: At the time of restructuring, the market rate of interest was 10%. What is Guimary Corporation's gain on debt restructuring?

a. P 1,979,180

b. P 1,600,000

c. P 1,221,020

d. P 0

Reference no: EM132577967

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