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What is the amount of gain on extinguishment of debt

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On December 31, 2012, Sunshine company showed the following data with respect to its matured obligation:

Mortgage Payable 12,000,000

Accrued interest payable 900,000

The entity is threatened with a court suit if it could not pay its maturing debt. Accordingly, the entity entered into an agreement with the creditor for the issuance of share capital in full settlement of the mortgage. The agreement provided for the issue of 105,000 shares with par value of P100. The share is currently quoted at P130. The fair value of the liability is P13,500,000.

Problem 1: If the carrying amount of the liability is used for the equity swap, what is the amount of gain/(loss) on extinguishment of debt?

Reference no: EM132756572

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