What is the gain on extinguishment of debt to be recognized

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Reference no: EM132881004

Google Company had an overdue 8% note payable to First Bank at P8,000,000 and accrued interest of P640,000. As result of a restructuring agreement on January 1, 2016, First Bank agreed to the following provisions: The principal obligation is reduced to P7,000,000. The accrued interest of P640,000 is forgiven. The date of maturity is extended to December 31, 2019. Annual interest 10% is to be paid for 4 years every December 31. The present value of 1 at 8% for 4 periods is 0. 735 and the present value of an ordinary annuity of 1 at 8% for 4 periods is 3.31.

Problem 1: What is the gain on extinguishment of debt to be recognized for 2016?

a. 1,000,000

b. 1,178,000

c. 1,640,000

d. 538,0000

Reference no: EM132881004

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