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What is the amount of gain or loss on extinguishment of debt

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Baguio Company is experiencing financial difficulty and is negotiating debt restructuring with its creditor to relieve its financial stress. Baguio company has a P2,000,000 note payable to First Bank.

The bank is considering two alternatives.

1. Acceptance of land owned by Baguio company valued at P1,600,000 and carried at its historical cost of P1,120,000.

2. Acceptance of an equity interest in Baguio company in the form of 16,000 shares with fair value of P120 per share. The share capital has a par value of P100 per share.

Problem 1: Using the data above, under the second alternative, what is the amount of gain/(loss) on extinguishment of debt?

Reference no: EM132756578

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