On January 1, 20x1, Skid Row Co. acquired ₱2,000,000 face amount, 10% bonds for ₱1,903,927. The
bonds were measured at amortized cost. The principal is due on January 1, 20x4 but interest
payments are due annually every December 31. The effective interest rate is 12%. On December 31,
20x2, the investee entered into a corporate rehabilitation program resulting in the extension of the
maturity of the bonds to January 1, 20x6. Skid Row sees this as a loss event. Skid Row estimates that
only the face amount of the bonds will be collected, in lump-sum, on January 1, 20x6. There is no
interest receivable as of December 31, 20x2. The current market rate on December 31, 20x2 is 14%.
How much is the impairment loss recognized on December 31, 20x2?
a. 223,734
b. 483,914
c. 540,726
d. 0