What is the gain on debt restructuring

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Question - On January 1, 2018, Sarangani Company showed the following:

Long Term note 6,000,000

At the end of 2017, Saragani had started to experience extreme financial pressure and is in default in meeting the interest payment on its long term note. This had continued until 2018, the company did not accrue the interest for 2018. The interest rate is 10% payable every December 31.

In an aggreement with the creditor, Sarangani Corporation obtained the following changes in terms of the note.

The accrued interest is forgiven.

The principal obligation will be due on December 31, 2023.

The new interest rate is 8%

What is the gain on debt restructuring to be recognized by Sarangani?

a. 2,579,180

b. 1,600,000

c. 455,016

d. Nil

Reference no: EM132818139

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