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Stellar Corporation is having financial difficulty and therefore has asked Pearl National Bank to restructure its $6 million note outstanding. The present note has 3 years remaining and pays a current rate of interest of 8%. The present market rate for a loan of this nature is 10%. The note was issued at its face value. The following are four independent situations. Prepare the journal entry that Stellar and Pearl National Bank would make for each of these restructurings. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to O 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 the amount is entered. Do not indent manually. List all debit entries before credit entries.) (a) Pearl National Bank agrees to take an equity interest in Stellar by accepting common stock valued at $3,880,000 in exchange for relinquishing its claim on this note. The common stock has a par value of $1,634,000. (b) Pearl National Bank agrees to accept land in exchange for relinquishing its claim on this note. The land has a book value of $3,170,000 and a fair value of $4,029,000. (c) Pearl National Bank agrees to modify the terms of the note, indicating that Stellar does not have to pay any interest on the note over the 3-year period. (d) Pearl National Bank agrees to reduce the principal balance due to $5,172,414 and require interest only in the second and third year at a rate of 8%. Click here to view factor tables. No. Account Titles and Explanation (a) Stellar Corporation Pearl National Bank (b) Stellar Corporation Debit Credit

Stellar Corporation is having financial difficulty and therefore has asked Pearl National Bank to restructure its $6 million note outstanding. The present note has 3 years remaining and pays a current rate of interest of 8%. The present market rate for a loan of this nature is 10%. The note was issued at its face value. The following are four independent situations. Prepare the journal entry that Stellar and Pearl National Bank would make for each of these restructurings. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to O 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 the amount is entered. Do not indent manually. List all debit entries before credit entries.) (a) Pearl National Bank agrees to take an equity interest in Stellar by accepting common stock valued at $3,880,000 in exchange for relinquishing its claim on this note. The common stock has a par value of $1,634,000. (b) Pearl National Bank agrees to accept land in exchange for relinquishing its claim on this note. The land has a book value of $3,170,000 and a fair value of $4,029,000. (c) Pearl National Bank agrees to modify the terms of the note, indicating that Stellar does not have to pay any interest on the note over the 3-year period. (d) Pearl National Bank agrees to reduce the principal balance due to $5,172,414 and require interest only in the second and third year at a rate of 8%. Click here to view factor tables. No. Account Titles and Explanation (a) Stellar Corporation Pearl National Bank (b) Stellar Corporation Debit Credit

Financial Reporting, Financial Statement Analysis and Valuation
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter7: Financial Activities
Section: Chapter Questions
Problem 7QE
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Stellar Corporation is having financial difficulty and therefore has asked Pearl National Bank to restructure its $6 million note outstanding. The present note has 3 years remaining and pays a current rate of interest of 8%. The present market rate for a loan of this nature is 10%. The note was issued at its face value. The following are four independent situations. Prepare the journal entry that Stellar and Pearl National Bank would make for each of these restructurings. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to O 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 the amount is entered. Do not indent manually. List all debit entries before credit entries.) (a) Pearl National Bank agrees to take an equity interest in Stellar by accepting common stock valued at $3,880,000 in exchange for relinquishing its claim on this note. The common stock has a par value of $1,634,000. (b) Pearl National Bank agrees to accept land in exchange for relinquishing its claim on this note. The land has a book value of $3,170,000 and a fair value of $4,029,000. (c) Pearl National Bank agrees to modify the terms of the note, indicating that Stellar does not have to pay any interest on the note over the 3-year period. (d) Pearl National Bank agrees to reduce the principal balance due to $5,172,414 and require interest only in the second and third year at a rate of 8%. Click here to view factor tables. No. Account Titles and Explanation (a) Stellar Corporation Pearl National Bank (b) Stellar Corporation Debit Credit
Transcribed Image Text:Stellar Corporation is having financial difficulty and therefore has asked Pearl National Bank to restructure its $6 million note outstanding. The present note has 3 years remaining and pays a current rate of interest of 8%. The present market rate for a loan of this nature is 10%. The note was issued at its face value. The following are four independent situations. Prepare the journal entry that Stellar and Pearl National Bank would make for each of these restructurings. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to O 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 the amount is entered. Do not indent manually. List all debit entries before credit entries.) (a) Pearl National Bank agrees to take an equity interest in Stellar by accepting common stock valued at $3,880,000 in exchange for relinquishing its claim on this note. The common stock has a par value of $1,634,000. (b) Pearl National Bank agrees to accept land in exchange for relinquishing its claim on this note. The land has a book value of $3,170,000 and a fair value of $4,029,000. (c) Pearl National Bank agrees to modify the terms of the note, indicating that Stellar does not have to pay any interest on the note over the 3-year period. (d) Pearl National Bank agrees to reduce the principal balance due to $5,172,414 and require interest only in the second and third year at a rate of 8%. Click here to view factor tables. No. Account Titles and Explanation (a) Stellar Corporation Pearl National Bank (b) Stellar Corporation Debit Credit
(b) Stellar Corporation Pearl National Bank (c) Stellar Corporation Pearl National Bank (d) Stellar Corporation Pearl National Bank
Transcribed Image Text:(b) Stellar Corporation Pearl National Bank (c) Stellar Corporation Pearl National Bank (d) Stellar Corporation Pearl National Bank
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