On December 31, 2025, American Bank enters into a debt restructuring agreement with Teal Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par,$3,300,000 note receivable by the following modifications: Reducing the principal obligation from $3,300,000 to $2,220,000. Extending the maturity date from December 31, 2025, to January 1, 2029.Reducing the interest rate from 12% to 10%. Teal pays interest at the end of each year. On January 1, 2029, Teal Company pays $2,220,000 in cash to American Bank.(a) Can Teal Company record a gain under this term modification? If yes, compute the gain for Teal Company.If no, enter amount as 0. The gain for Teal Company $

Restructuring of debt is a procedure utilized by organizations to maintain a strategic distance from…

Answered: eal pays interest at the end of each…

eal pays interest at the end of each year. On January 1, 2029, Teal Company pays $2,220,000 in ca term modification? If yes, compute the gain for Teal Company. mpany S

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 30E

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On January 1, 2019, Northfield Corporation becomes delinquent on a 100,000, 14% note to First National Bank, on which 16,651 of interest has accrued. On January 2, 2019, the bank agrees to restructure the note. It forgives the accrued interest, extends the repayment date to December 31, 2021, and reduces the interest rate to 10%. Required: Prepare a schedule for Northfield to compute the annual interest expense in regard to the preceding note for each year of the restructuring agreement.
On December 31, 2023, Green Bank enters into a debt restructuring agreement with Windsor Inc., which is now experiencing financial trouble. The bank agrees to restructure a $2.9-million, 10% note receivable issued at par by the following modifications: 1. Reducing the principal obligation from $2.9 million to $2.76 million 2. Extending the maturity date from December 31, 2023, to December 31, 2026 3. Reducing the interest rate from 10% to 8% Windsor pays interest at the end of each year. On January 1, 2027, Windsor pays $2.76 million in cash to Green Bank. Windsor prepares financial statements in accordance with IFRS 9. Assume instead that Windsor follows ASPE. Using (1) a financial calculator or (2) Excel function Rate, calculate the rate of interest that Windsor should use to calculate its interest expense in future periods. (Hint: Refer to Chapter 3 for tips on calculating.) (Round answer to 4 decimal places, e.g. 1.2246%.) Rate of interest %
On December 31, 2023, Green Bank enters into a debt restructuring agreement with Windsor Inc., which is now experiencing financial trouble. The bank agrees to restructure a $2.9-million, 10% note receivable issued at par by the following modifications: 1. Reducing the principal obligation from $2.9 million to $2.76 million 2. Extending the maturity date from December 31, 2023, to December 31, 2026 3. Reducing the interest rate from 10% to 8% Windsor pays interest at the end of each year. On January 1, 2027, Windsor pays $2.76 million in cash to Green Bank. Windsor prepares financial statements in accordance with IFRS 9. Prepare the interest payment entry for Windsor on December 31, 2025, and the entry on January 1, 2027. (Round answer to O decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries…
On December 31, 2023, Green Bank enters into a debt restructuring agreement with Teal Mountain Inc., which is now experiencing financial trouble. The bank agrees to restructure a $2.1-million, 10% note receivable issued at par by the following modifications: 1. Reducing the principal obligation from $2.1 million to $2.00 million Extending the maturity date from December 31, 2023, to December 31, 2026 3. Reducing the interest rate from 10% to 8% 2. Teal Mountain pays interest at the end of each year. On January 1, 2027, Teal Mountain pays $2.00 million in cash to Green Bank. Teal Mountain prepares financial statements in accordance with IFRS 9. (b) Prepare an entry at December 31, 2023, based on the results of your calculation. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry…
On December 31, 2023, Crane Bank enters into a debt restructuring agreement with Troubled Inc., which is now experiencing financial trouble. The bank agrees to restructure a $1.0-million, 10% note receivable issued at par by the following modifications: 1. Reducing the principal obligation from $1.0 million to $0.80 million Extending the maturity date from December 31, 2023, to December 31, 2026 Reducing the interest rate from 10% to 9% 2. 3. Troubled pays interest at the end of each year. On January 1, 2027, Troubled Inc. pays $0.80 million in cash to Crane Bank for the principal. The market rate is currently 9%. Answer the following questions related to Crane Bank (the creditor). Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. What interest rate should Crane Bank use to calculate the loss on the debt restructuring? Interest rate List of Accounts 10 % Using (1) factor tables, (2) a financial calculator, or…
On December 31, 2020, American Bank enters into a debt restructuring agreement with Barkley Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $3,000,000 note receivable by the following modifications: 1. Reducing the principal obligation from $3,000,000 to $2,400,000. 2. Extending the maturity date from December 31, 2020, to January 1, 2024. 3. Reducing the interest rate from 12% to 10%. Barkley pays interest at the end of each year. On January 1, 2024, Barkley Company pays $2,400,000 in cash to American Bank. Instructions a. Will the gain recorded by Barkley be equal to the loss recorded by American Bank under the debt restructuring? Explain. b. Can Barkley Company record a gain under the term modification mentioned above? Explain. c. Assuming that the interest rate Barkley should use to compute interest expense in future periods is 1.4276%, prepare the interest payment schedule of the note for Barkley Company…
On December 31, 2020, American Bank enters into a debt restructuring agreement with Shamrock Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $3,760,000 note receivable by the following modifications: 1. Reducing the principal obligation from $3,760,000 to $3,008,000. 2. Extending the maturity date from December 31, 2020, to January 1, 2024. 3. Reducing the interest rate from 12% to 10%. Shamrock pays interest at the end of each year. On January 1, 2024, Shamrock Company pays $3,008,000 in cash to American Bank. Assuming that the interest rate Shamrock should use to compute interest expense in future periods is 1.4276%, prepare the interest payment schedule of the note for Shamrock Company after the debt restructuring. (Round answers to 0 decimal places, e.g. 38,548.) SHAMROCK COMPANYInterest Payment Schedule After Debt RestructuringEffective-Interest Rate Date CashPaid InterestExpense…
On December 31, 2020, American Bank enters into a debt restructuring agreement with Flint Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $ 2,110,000 note receivable by the following modifications: 1. Reducing the principal obligation from $ 2,110,000 to $ 1,688,000. 2. Extending the maturity date from December 31, 2020, to January 1, 2024. 3. Reducing the interest rate from 12% to 10%. Flint pays interest at the end of each year. On January 1, 2024, Flint Company pays $ 1,688,000 in cash to American Bank. Assuming that the interest rate Flint should use to compute interest expense in future periods is 1.4276%, prepare the interest payment schedule of the note for Flint Company after the debt restructuring. (Round answers to 0 decimal places, e.g. 38,548.)Assuming that the interest rate Flint should use to compute interest expense in future periods is 1.4276%, prepare the interest payment schedule of the…
On December 31, 2020, Rose National Bank enters into a debt restructuring agreement with Emerald Resorts, which is experiencing financial difficulties. The bank restructures a $14,000,000 loan receivable issued at par (interest paid to date) by: 1. Reducing the principal obligation from $14,000,000 to $12,000,000; 2. Extending the maturity date from December 31, 2020 to December 31, 2025; and 3. Reducing the interest rate from 8% to 6%. Interest income from the note receivable from Emerald Resorts in 2022 was
On December 31, 2025, American Bank enters into a debt restructuring agreement with Coronado Company, which is now experiencing financial trouble. The bank agrees to restructure a 12% , issued at par, $3,600,000 note receivable by the following modifications: 2. 3. Coronado pays interest at the end of each year. On January 1, 2029, Coronado Company pays $2,430,000 in cash to American Bank. (a) Reducing the principal obligation from $3,600,000 to $2,430,000. Extending the maturity date from December 31, 2025, to January 1, 2029. Reducing the interest rate from 12% to 10%. Your answer is partially correct. Can Coronado Company record a gain under this term modification? (b). Yes V If yes, compute the gain for Coronado Company. If no, enter amount as 0. The gain for Coronado Company $ eTextbook and Media List of Accounts Save for Later Prepare the journal entries to record the gain on Coronado's books. (If no entry is required, select "No Entry" for the account titles and enter O for the…
On December 31, 2021, Piper Inc enters into a debt restructuring agreement with Nolte Company, which is now experiencing financial trouble. Piper agrees to restructure a 12%, issued at par, $5,000,000 note receivable by the following modifications:i. Reducing the principal obligation from $5,000,000 to $4,500,000.ii. Extending the maturity date from December 31, 2021, to December 31, 2024.iii. Reducing the interest rate from 12% to 10%. Nolte pays interest at the end of each year (beginning December 31, 2022). On December 31, 2024 Nolte Company will pay $4,500,000 in cash to Piper. In 2021, Nolte should record gain of:
Due to adverse economic circumstances and poor management, Tagaytay Highlands Company had negotiated a restructuring of the 9% P6,000,000 note payable to Second Bank due on January 1, 2021. There is no accrued interest on the note. The bank has reduced the principal obligation from P6,000,000 to P5,000,000 and extend the maturity to 3 years on December 31, 2023. However, the new interest rate is 13% payable annually every December 31. The present value of 1 at 9% for three periods is .77 and the present value of an ordinary annuity of 1 at 9% for three periods is 2.53. What is the present value of the new liability? What is the gain on modification of debt for 2021? What is the interest expense for 2021?