Reference no: EM132939103
Problem - On December 31, 20x1, Basty Co. agreed to the following modification of its existing liability. Reduced the principal on the loan of P20,000,000 to P16,000,000.
Forgave the accrued interest of P2,400,000.
Extended the maturity date from December 31, 20x2 to December 31, 20x4.
Reduced the loan's nominal interest rate of 12% to 10%.
Interest is payable annually at each year end. The original effective interest rate of the debt instrument for both Basty and its creditor, the Bank, is 12%. The prevailing market rate of interest as of December 31, 20x1 is 11%. How much is the gain (loss) on the extinguishment of the debt?
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