Daniel Perkins is the sole shareholder of Blue Inc., which is currently under protection of the U.S. bankruptcy court. As a "debtor in possession," he has negotiated the following revised loan agreement with United Bank. Blue Inc.'s $540,000, 11%, 10-year note was refinanced with a $540,000, 6%, 10-year note. (a) What is the accounting nature of this transaction? Troubled debt restructuring (b) Prepare the journal entry to record this refinancing: (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) (1) On the books of Blue Inc.

Daniel Perkins is the sole shareholder of Blue Inc., which is currently under protection of the U.S. bankruptcy court. As a "debtor in possession," he has negotiated the following revised loan agreement with United Bank. Blue Inc.'s $540,000, 11%, 10-year note was refinanced with a $540,000, 6%, 10-year note. (a) What is the accounting nature of this transaction? Troubled debt restructuring (b) Prepare the journal entry to record this refinancing: (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) (1) On the books of Blue Inc.

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter17: Corporations: Introduction And Operating Rules

Section: Chapter Questions

Problem 50P

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Daniel Perkins is the sole shareholder of Perkins Inc., which is currently under protection of the U.S. bankruptcy court. As a “debtor in possession,” he has negotiated the following revised loan agreement with United Bank. Perkins Inc.'s $600,000, 12%, 10-year note was refinanced with a $600,000, 5%, 10-year note. Instructions a. What is the accounting nature of this transaction? b. Prepare the journal entry to record this refinancing: 1. On the books of Perkins Inc. 2. On the books of United Bank. c. Discuss whether generally accepted accounting principles provide the proper information useful to managers and investors in this situation.
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