At January 1, 2024, NCI Industries, Incorporated was indebted to First Federal Bank under a $246,000, 10% unsecured note. . The note was signed January 1, 2017, and was due December 31, 2025. Annual interest was last paid on December 31, 2022. • NCI was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. • First Federal agreed to reduce last year's interest and the remaining two years' interest payments to $11,844 each and delay all payments until December 31, 2025, the maturity date. Required: Prepare the journal entries by NCI Industries, Incorporated, necessitated by the restructuring of the debt at: (1) January 1, 2024; (2) December 31, 2024; and (3) December 31, 2025. Note: Do not round intermediate calculations. Round final answers to the nearest whole dollar. If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of S1) View transaction list View journal entry worksheet No Date 1 January 01, 2024 No joumal entry required General Journal Credit Ⓒ

At January 1, 2024, NCI Industries, Incorporated was indebted to First Federal Bank under a $246,000, 10% unsecured note. . The note was signed January 1, 2017, and was due December 31, 2025. Annual interest was last paid on December 31, 2022. • NCI was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. • First Federal agreed to reduce last year's interest and the remaining two years' interest payments to $11,844 each and delay all payments until December 31, 2025, the maturity date. Required: Prepare the journal entries by NCI Industries, Incorporated, necessitated by the restructuring of the debt at: (1) January 1, 2024; (2) December 31, 2024; and (3) December 31, 2025. Note: Do not round intermediate calculations. Round final answers to the nearest whole dollar. If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Use tables, Excel, or a financial calculator. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of S1) View transaction list View journal entry worksheet No Date 1 January 01, 2024 No joumal entry required General Journal Credit Ⓒ

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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am. 113.
BDO loaned P5,000,000 to NOBLE Company on January 1, 2016. The terms of the loan require the principal payment of P5,000,000 to be made after 5 years on December 31, 2020 and interest at 12% to be paid annually on December 31. The first interest payment is due on December 31, 2016. NOBLE Company made the required interest payment during 2016. However, during 2017 NOBLE Company began to experience financial difficulties, which led to the default of the 2017 required interest payment. This caused BDO to reassess the collectability of the loan. On December 31, 2018, BDO did not continue to accrue interest and determined that the remaining principal payment will be collected but it is probable that the accrued interest further interest cannot be collected. The probable timing and amount of collections is determined as follows: December 31, 2019 P500,000 December 31, 2020 1,000,000 December 31, 2021 1,500,000 December 31, 2022 2,000,000 The present value at 12% is as follows: For one period…
Blue Cells Can contain On December 31, 2017, Short Co. is in financial difficulty and cannot pay a note due that day. It is a $2,000,000 face value note with $200,000 accrued interest payable to Bryan, Inc. The original market rate of interest on the note was 12.58613%. Bryan agrees to forgive the accrued interest, extend the maturity date (two years) to December 31, 2019, and reduce the interest rate to 4%. The present value of the restructured cash flows is $1,712,000 (using the original market rate). Do NOT add rows to the spreadsheet! Discount Cash Premium Interest payable Par Interest expense Discount on bond payable Yes Bonds payable No Loss on redemption Gain on redemptin Cash Interest payable Interest receivable Notes payable Gain on restructuring Loss on restructuring Discount on Note payable Premium on Note payable…
At January 1, 2024, Mahmoud Industries, Incorporated, owed Second BancCorp $12 million under a 10% note due December 31, 2026. Interest was paid last on December 31, 2022. Mahmoud was experiencing severe financial difficulties and asked Second BancCorp to modify the terms of the debt agreement. After negotiation Second BancCorp agreed to: Forgive the interest accrued for the year just ended. Reduce the remaining two years’ interest payments to $1 million each and delay the first payment until December 31, 2025. Reduce the unpaid principal amount to $11 million. Required: Prepare the journal entries by Mahmoud Industries, Incorporated, necessitated by the restructuring of the debt at (1) January 1, 2024; (2) December 31, 2025; and (3) December 31, 2026.
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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 August 31, Latty Co. partially refinanced $900,000 of its outstanding 10% note payable made one year ago to Dugan State Bank by paying $900,000 plus $90,000 interest, having obtained the $990,000 by using $262,000 cash and signing a new one-year $800,000 note discounted at 9% by the bank. Instructions (1) Make the entry to record the partial refunding. (2) Prepare the adjusting entry at December 31, assuming straight-line amortization of the discount
Due to extreme financial difficulties, Armand Company had negotiated a restructuring of a 10% P 5,000,000 note payable due on Dec. 31, 2020. There is no accrued interest on the note. The creditor agreed to reduce the face amount to P 4,000,000, forgive the unpaid interest, reduce the interest rate to 8% and extend the due date three years from Dec. 31, 2020. The present value of 1 at 10% for 3-periods is 0.75 and the present value of an ordinary annuity of 1 at 10% for 3-periods is 2.49. What is the gain on extinguishment for 2020? *a. P 1,703,200b. P 1,203,200c. P 2,000,000d. P 540,000
On January 1, 2011, SVTA Bank extended a P1,200,000 loan to ABC, Inc. Principal is due on December 31, 2015 but 11% interest is due annually every December 31. On December 31, 2013, ABC, Inc. was delinquent and it was ascertained that the loan is impaired. SVTA Bank assessed that interests accruing on the loan will not be collected; however, the principal is expected to be received in three equal annual installments starting on December 31, 2014. Accrued interest receivable on December 31, 2013 amounted to P132,000. The current market rate on December 31, 2013 is 13%. How much is the balance of allowance for impairment loss on December 31, 2013 immediately after impairment testing?
Howard Manufacturing has two debts outstanding with a creditor. Howard is experiencing financial difficulties, and the creditor has granted a concession. Therefore, accounting for the debt in question qualifies as a troubled debt restructuring. At the date of the restructuring, July 1 of the current year, the two debts and the proposed restructuring are as follows:Debt A—This debt has a carrying value of $1,200,000 plus accrued interest of $24,000 at the restructuring date. The terms of restructuring call for Howard to transfer to the creditor a vacant parcel of land with a fair market value of $600,000 and a book value of $425,000. In addition, Howard will pay $70,000 to the creditor at the end of each of the next eight calendar quarters. Debt B—This 6% debt has a carrying value of $2,100,000 and accrued interest of $52,500.The terms of the restructuring call for Howard to issue nonvoting common stock with a fair value of $500,000 to the creditor. In addition, $193,553.02 will be paid…
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…
Down Company has an overdue Notes Payable to City Bank of P8,000,000 and recorded accrued interest of P640,000 based on 8% interest rate. This rate of interest is presumed to be the market rate at the time of debt restructuring. As a result of a settlement on December 31, 2012, City Bank agreed to these restructuring arrangements: reduce the principal obligation to P6,000,000; forgive the P640,000 accrued interest; extend the maturity date to December 31, 2014; and annual interest of 10% is to be paid on December 31, 2013 and 2014.What is Down Company’s gain on debt restructuring? (Round off present value factors to four decimal places) a. P 2,640,000 b. P 2,426,220 c. P 1,440,000 d. P 0