Answered: What is the present value of the new…

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?

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 28E: On January 1, 2019, Northfield Corporation becomes delinquent on a 100,000, 14% note to First...

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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 $
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…
management, Tagaytay Highlands Company had negotiated a restructuring of an 8% P6,000,000 note payable to Second Due to adverse economic circumstances and poor Bank due on January 1, 2021. There was no accrued interest Bank due on January 1, 2021. There was no accrued interest on the note on January 1, 2021. The bank reduced the principal obligation from P6,000,000 to P5,000,000 and extended the maturity to three years on December 31, 2023. However, the new stated interest rate is 12% payable annually every December 31. The present value of 1 at 8% for three periods is .79 and the present valuè of an ordinary annuity of 1 at 8% for three periods is 2.58. The market rate of interest is 10%. The PV of 1 at 10% for 3 periods is 0.75 and the PV of an ordinary annuity of 1 at 10% for 3 periods is 2.49. 1. What amount should be reported as present value of the new note payable on January. 1, 2021? a. 6,000,000 b. 5,000,000. c. 5,498,000 d. 5,244,000 2. What amount of gain on modification of…
On January 1, 2017, Cheyenne Company issued a $1,224,300, 5-year, zero-interest-bearing note to Ayayai Bank. The note was issued to yield 8% annual interest. Unfortunately, during 2018 Cheyenne fell into financial trouble due to increased competition. After reviewing all available evidence on December 31, 2018, Ayayai Bank decided that the loan was impaired. Cheyenne will probably pay back only $816,200 of the principal at maturity.
On December 31, 2021, LOL Company is experiencing extreme financial pressure and is in default in meeting interest payment on its long-term note of P7,000,000 due on December 31, 2021. The interest rate is 10% payable every December 31. In an agreement with the creditor, LOL obtained the following changes in the terms of the note: * The accrued interest of P700,000 on December 31, 2021 is forgiven. The principal is reduced by P1,000,000. * The new interest rate is 8%. The new date of maturity is December 31, 2026. At the time of restructuring, the market rate of interest was 10%. What is LOL Company's gain on debt restructuring?
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…
Due to extreme financial difficulties, Armada Company has negotiated a restructuring of its 10% P5,000,000 note payable due on December 31, 2021. The unpaid interest on the note on such date is P500,000. The creditor has agreed to reduce the face value to P4,000,000, forgive the unpaid interest, reduce the interest rate to 8% and extend the due date three years from December 31, 2021. 1. What is the interest expense for 2022? 2. What amount should Armada Company report as gain (loss) on extinguishment of debt in 2021?
On December 31, 2019, GMC had a document payable with a value in the $ 100,000 books. GMC has faced economic difficulties that have not allowed to meet the payment of this debt. Suppose that on the date mentioned the The bank agreed to change the terms of the loan as follows: the principal (maturity value) was reduced to $ 80,000, the expiration date was changed to 31 December 2022, and the contractual interest rate was reduced from 15% to 10%. Determine the effect of this restructuring of debt on the Net Income of GMC on 12/31/19. to. GMC is going to report a profit of $ 20,000. b. GMC will report a profit equal to 5% of the principal. c. GMC is going to report a profit of $ 4,000. d. When the terms of the contract are adjusted, the debtor does NOT report earnings.
During 2021, tesa Company experienced financial difficulties and is likely to default on a P5,000,000, 15% three year note dated January 1, 2019 payable to Bank of the Pasa Island. On December 31, 2021, the bank agreed to settle the note and unpaid interest of P750,000 for P4,100,000 cash payable on January 31, 2022. . What amount should be reported as gain from extinguishment of debt in 2021 balance sheet?
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…