At January 1, 2016, Brainard Industries, Inc., owed Second BancCorp $12 million under a 10% note due December 31, 2018. Interest was paid last on December 31, 2014. Brainard was experiencing severe financial difficulties and asked Second BancCorp to modify the terms of the debt agreement. After negotiation Second BancCorp agreed to: a. Forgive the interest accrued for the year just ended. b. Reduce the remaining two years’ interest payments to $1 million each and delay the first payment until December 31, 2017. c. Reduce the unpaid principal amount to $11 million. Required: Prepare the journal entries by Brainard Industries, Inc., necessitated by the restructuring of the debt at (1) January 1, 2016; (2) December 31, 2017; and (3) December 31, 2018.
At January 1, 2016, Brainard Industries, Inc., owed Second BancCorp $12 million under a 10% note due December 31, 2018. Interest was paid last on December 31, 2014. Brainard was experiencing severe financial difficulties and asked Second BancCorp to modify the terms of the debt agreement. After negotiation Second BancCorp agreed to: a. Forgive the interest accrued for the year just ended. b. Reduce the remaining two years’ interest payments to $1 million each and delay the first payment until December 31, 2017. c. Reduce the unpaid principal amount to $11 million. Required: Prepare the journal entries by Brainard Industries, Inc., necessitated by the restructuring of the debt at (1) January 1, 2016; (2) December 31, 2017; and (3) December 31, 2018.
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
Related questions
Question
At January 1, 2016, Brainard Industries, Inc., owed Second BancCorp $12 million under a 10% note due December 31, 2018. Interest was paid last on December 31, 2014. Brainard was experiencing severe financial difficulties and asked Second BancCorp to modify the terms of the debt agreement. After negotiation Second BancCorp agreed to: a. Forgive the interest accrued for the year just ended. b. Reduce the remaining two years’ interest payments to $1 million each and delay the first payment until December 31, 2017. c. Reduce the unpaid principal amount to $11 million. Required: Prepare the
Expert Solution
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Financial Reporting, Financial Statement Analysis…
Finance
ISBN:
9781285190907
Author:
James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:
Cengage Learning
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Financial Reporting, Financial Statement Analysis…
Finance
ISBN:
9781285190907
Author:
James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:
Cengage Learning
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Financial Accounting
Accounting
ISBN:
9781305088436
Author:
Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:
Cengage Learning
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning