Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 14, Problem 14.34E
(1)
To determine
Troubled debt restructuring
When the unique terms of a debt agreement is encouraged by the financial complicationsby the debtor (borrower), the new agreement is referred to as a troubled debt restructuring. It includes some allowances on the part of the creditors (issuer).
To Prepare: The
(2)
To determine
To Prepare: The journal entry to record the restructuring of the debt at December 31, 2019.
(3)
To determine
To prepare: The journal entry to record the restructuring of the debt at December 31, 2020.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionChapter 14 Solutions
Intermediate Accounting
Ch. 14 - How is periodic interest determined for...Ch. 14 - As a general rule, how should long-term...Ch. 14 - How are bonds and notes the same? How do they...Ch. 14 - What information is contained in a bond indenture?...Ch. 14 - On January 1, 2018, Brandon Electronics issued 85...Ch. 14 - How is the price determined for a bond (or bond...Ch. 14 - A zero-coupon bond pays no interest. Explain.Ch. 14 - Prob. 14.8QCh. 14 - Compare the two commonly used methods of...Ch. 14 - Prob. 14.10Q
Ch. 14 - When a notes stated rate of interest is...Ch. 14 - How does an installment note differ from a note...Ch. 14 - Prob. 14.13QCh. 14 - Prob. 14.14QCh. 14 - Air Supply issued 6 million of 9%, 10-year...Ch. 14 - Both convertible bonds and bonds issued with...Ch. 14 - Prob. 14.17QCh. 14 - Cordova Tools has bonds outstanding during a year...Ch. 14 - If a company prepares its financial statements...Ch. 14 - (Based on Appendix 14A) Why will bonds always sell...Ch. 14 - Prob. 14.21QCh. 14 - Prob. 14.22QCh. 14 - Prob. 14.23QCh. 14 - Bank loan; accrued interest LO132 On October 1,...Ch. 14 - Non-interest-bearing note; accrued interest LO132...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Straight-line interest on bonds LO142 On January...Ch. 14 - Investment in bonds LO142 On January 1, a company...Ch. 14 - Note issued for cash; borrower and lender LO143...Ch. 14 - Note with unrealistic interest rate LO143 On...Ch. 14 - Installment note LO143 On January 1, a company...Ch. 14 - Prob. 14.12BECh. 14 - Bonds with detachable warrants LO145 Hoffman...Ch. 14 - Convertible bonds LO145 Hoffman Corporation...Ch. 14 - Reporting bonds at fair value LO146 AI Tool and...Ch. 14 - Bond valuation LO142 Your investment department...Ch. 14 - Determine the price of bonds in various situations...Ch. 14 - Determine the price of bonds; issuance; effective...Ch. 14 - Investor; effective interest LO142 (Note: This is...Ch. 14 - Bonds; issuance; effective interest; financial...Ch. 14 - Bonds; issuance; effective interest LO142 The...Ch. 14 - Prob. 14.7ECh. 14 - Investor; straight-line method LO142 (Note: This...Ch. 14 - Issuance of bonds; effective interest;...Ch. 14 - Issuance of bonds; effective interest;...Ch. 14 - Bonds; effective interest; adjusting entry LO142...Ch. 14 - Prob. 14.12ECh. 14 - Issuance of bonds; effective interest LO142...Ch. 14 - Prob. 14.14ECh. 14 - Error correction; accrued interest on bonds LO142...Ch. 14 - Error in amortization schedule LO143 Wilkins Food...Ch. 14 - Prob. 14.17ECh. 14 - Note with unrealistic interest rate; lender;...Ch. 14 - Prob. 14.19ECh. 14 - Prob. 14.20ECh. 14 - Installment note LO143 LCD Industries purchased a...Ch. 14 - Prob. 14.22ECh. 14 - Early extinguishment LO145 The balance sheet of...Ch. 14 - Convertible bonds LO145 On January 1, 2018, Gless...Ch. 14 - Prob. 14.25ECh. 14 - Convertible bonds; induced conversion LO145 On...Ch. 14 - Prob. 14.27ECh. 14 - Bonds with detachable warrants LO145 On August 1,...Ch. 14 - Reporting bonds at fair value LO146 (Note: This...Ch. 14 - Reporting bonds at fair value LO146 On January 1,...Ch. 14 - Reporting bonds at fair value; calculate fair...Ch. 14 - Prob. 14.32ECh. 14 - Troubled debt restructuring; debt settled ...Ch. 14 - Prob. 14.34ECh. 14 - Troubled debt restructuring; modification of...Ch. 14 - Prob. 14.36ECh. 14 - Determining the price of bonds; discount and...Ch. 14 - Effective interest; financial statement effects ...Ch. 14 - Prob. 14.3PCh. 14 - Bond amortization schedule LO142 On January 1,...Ch. 14 - Issuer and investor; effective interest;...Ch. 14 - Prob. 14.6PCh. 14 - Prob. 14.7PCh. 14 - Bonds; effective interest; partial period...Ch. 14 - Zero-co upon bonds LO142 On January 1, 2018,...Ch. 14 - Prob. 14.10PCh. 14 - Prob. 14.11PCh. 14 - Prob. 14.12PCh. 14 - Note and installment note with unrealistic...Ch. 14 - Prob. 14.14PCh. 14 - Early extinguishment; effective interest LO145...Ch. 14 - Prob. 14.16PCh. 14 - Prob. 14.17PCh. 14 - Early extinguishment LO145 The long-term...Ch. 14 - Convertible bonds; induced conversion; bonds with...Ch. 14 - Convertible bonds; zero coupon; potentially...Ch. 14 - Prob. 14.21PCh. 14 - Determine bond price; record interest; report...Ch. 14 - Report bonds at fair value; quarterly reporting ...Ch. 14 - Prob. 14.24PCh. 14 - Prob. 14.25PCh. 14 - Troubled debt restructuring Appendix B At January...Ch. 14 - Prob. 14.1BYPCh. 14 - Real World Case 142 Zero-coupon debt; HP Inc. ...Ch. 14 - Prob. 14.4BYPCh. 14 - Prob. 14.5BYPCh. 14 - Prob. 14.6BYPCh. 14 - Prob. 14.8BYPCh. 14 - Prob. 14.9BYPCh. 14 - Research Case 1410 FASB codification research;...Ch. 14 - Prob. 14.11BYP
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.Similar questions
- (Appendix 14.1)Pamlico Company has a 500,000, 15%, 3-year note dated January 1, 2019, payable to Forest National Bank. On December 31, 2020, the bank agreed to settle the note and unpaid interest of 75,000 for 50,000 cash and marketable securities having a current market value of 375,000. Pamlicos acquisition cost of the securities is 385,000. Ignoring income taxes, what amount should Pamlico report as a gain from the debt restructuring on its 2020 income statement? a. 65,000 b. 75,000 c. 140,000 d. 150,000arrow_forwardRestructuring (Debtor) Oakwood Corporation is delinquent on a 2,400,000, 10% note to Second National Bank that was due January 1, 2019. At that time, Oakwood owed the principal amount plus 34,031.82 of accrued interest. Oakwood enters into a debt restructuring agreement with the bank on January 2, 2019. Required: Prepare the journal entries for Oakwood to record the debt restructuring agreement and all subsequent interest payments assuming the following independent alternatives: 1. The bank extends the repayment date to December 31, 2022, forgives the accrued interest owed, reduces the principal by 200,000, and reduces the interest rate to 8%. 2. The bank extends the repayment date to December 31, 2022, forgives the accrued interest owed, reduces the principal by 200,000, and reduces the interest rate to 1%. 3. The bank accepts 160,000 shares of Oakwoods 55 par value common stock, which is currently selling for 14.50 per share, in full settlement of the debt. 4. The bank accepts land with a fair value of 2,300,000 in full settlement of the debt. The land is being carried on Oakwoods books at a cost of 2,200,000.arrow_forwardExercise Issuance and Interest Amortization for Zero Coupon Note (Straight Line) Kerwin Company borrowed $10,000 on a 2-year, zero coupon note. The note was issued on January 1, 2020. The face amount of the note, $12,544, is to be paid at maturity on December 31, 2021. Required: Assuming straight line amortization, calculate the interest expense for 2020 and 2021. Prepare the entries to recognize the borrowing, the first years interest expense, and the second years interest expense plus redemption of the note at maturity.arrow_forward
- Comprehensive Notes Receivable On January 1, 2019, Seaver Company sold land with a book value of 23,000 to Bench Company. Bench paid 15,000 down and signed a 15,000 non-interest-bearing note, payable in two 7,500 annual installments on December 31, 2019, and 2020. Neither the fair value of the land nor of the note is determinable. Benchs incremental borrowing rate is 12%. Later in the year, on July 1, 2019, Seaver sold a building to Hane Company, accepting a 2-year, 100,000 non-interest-bearing note due July 1, 2021. The fair value of the building was 82,644.00 on the date of the sale. The building had been purchased at a cost of 90,000 on January 1, 2014, and had a book value of 67,500 on December 31, 2018. It was being depreciated on a straight-line basis (no residual value) over a 20-year life. Required: 1. Prepare all the journal entries on Seavers books for January 1, 2019, through December 31, 2020, in regard to the Bench note. 2. Prepare all the journal entries on Seavers books for July 1, 2019, through July 1, 2021, in regard to the Hane note. 3. Prepare the notes receivable portion of Seavers balance sheet on December 31, 2019 and 2020.arrow_forwardShort-Term Debt Expected to Be Refinanced On December 31, 2019, Excello Electric Company had 1 million of short-term notes payable due February 7, 2020. Excello expected to refinance these notes on a long-term basis. On January 15, 2020, the company issued bonds with a face value of 900,000 for 882,000. On January 22, 2020, the proceeds from the bond issue plus additional cash held by Excello on December 31, 2019, were used to liquidate the 1 million of short-term notes. The December 31, 2019, balance sheet is issued on February 12, 2020. Required: Prepare a partial balance sheet as of December 31, 2019, showing how the 1 million of short-term notes payable should be disclosed. Include an appropriate footnote for proper disclosure.arrow_forwardProblem Reporting Long-Term Debt Fridley Manufacturings accounting records reveal the following account balances after adjusting entries are made on December 31, 2020. Required: Prepare the current liabilities and long-term debt portions of Fridleys balance sheet at December 31, 2020. Provide a separate line item for each issue (do not combine separate bonds or notes payable), but some items may need to be split into more than one item. Accounts payable $ 62,500 Bonds payable (9.4%, due in 2027) 800,000 Lease liability* 41,500 Bonds payable (8.7%, due in 2023) 50,000 Deferred tax liability* 133.400 Discount on bonds payable (94%, due in 2027) 12,600 Income taxes payable 26,900 * Long term liability Interest payable $ 38,700 Installment note payable (8%, equal installments due 2021 to 2024) 120,000 Notes payable (7.8%, due in 2025) 400,000 Premium on notes payable (7.8%, due in 2025) 6, [00 Note payable, 4% $50,000 face amount. due in 2026 (net of discount) 31,900arrow_forward
- Income, Cash Flow, and Future Losses On January L 2017, Cermack National Bank loaned 55,000,000 under a 2-year, zero coupon note to a real estate developer. The bank recognized interest revenue on this note of approximately $400,000 per year. Due to an economic downturn, the developer was unable to pay the $5,800,000 maturity amount on December 31, 2018. The bank convinced the developer to pay $800,000 on December 31, 2018, and agreed to extend $5,000,000 credit to the developer despite the gloomy economic outlook for the next several years. Thus, on December 31, 2018, the bank issued a new 2-year, zero coupon note to the developer to mature on December 31, 2020, for $6,000,000. The bank recognized interest revenue on this note of approximately $500,000 per year. The banks external auditor insisted that the riskiness of the new loan be recognized by increasing the allowance for uncollectible notes by $1,500,000 on December 31, 2018, and $2,000,000 on December 31, 2019. On December 31, 20201 the bank received $1,200,000 from the developer and learned that the developer was in bankruptcy and that no additional amounts would be recovered. Required: Prepare a schedule showing the effect of the notes on net income in each of the 4 years.arrow_forwardIncome, Cash Flow, and Future Losses On January L 2017, Cermack National Bank loaned 55,000,000 under a 2-year, zero coupon note to a real estate developer. The bank recognized interest revenue on this note of approximately $400,000 per year. Due to an economic downturn, the developer was unable to pay the $5,800,000 maturity amount on December 31, 2018. The bank convinced the developer to pay $800,000 on December 31, 2018, and agreed to extend $5,000,000 credit to the developer despite the gloomy economic outlook for the next several years. Thus, on December 31, 2018, the bank issued a new 2-year, zero coupon note to the developer to mature on December 31, 2020, for $6,000,000. The bank recognized interest revenue on this note of approximately $500,000 per year. The banks external auditor insisted that the riskiness of the new loan be recognized by increasing the allowance for uncollectible notes by $1,500,000 on December 31, 2018, and $2,000,000 on December 31, 2019. On December 31, 20201 the bank received $1,200,000 from the developer and learned that the developer was in bankruptcy and that no additional amounts would be recovered. Required: 1. Prepare a schedule showing annual cash flows fur the two notes in each of the 4 years.arrow_forwardIncome, Cash Flow, and Future Losses On January L 2017, Cermack National Bank loaned 55,000,000 under a 2-year, zero coupon note to a real estate developer. The bank recognized interest revenue on this note of approximately $400,000 per year. Due to an economic downturn, the developer was unable to pay the $5,800,000 maturity amount on December 31, 2018. The bank convinced the developer to pay $800,000 on December 31, 2018, and agreed to extend $5,000,000 credit to the developer despite the gloomy economic outlook for the next several years. Thus, on December 31, 2018, the bank issued a new 2-year, zero coupon note to the developer to mature on December 31, 2020, for $6,000,000. The bank recognized interest revenue on this note of approximately $500,000 per year. The banks external auditor insisted that the riskiness of the new loan be recognized by increasing the allowance for uncollectible notes by $1,500,000 on December 31, 2018, and $2,000,000 on December 31, 2019. On December 31, 20201 the bank received $1,200,000 from the developer and learned that the developer was in bankruptcy and that no additional amounts would be recovered. Required: Which figure, net income or net cash flow, does the better job of telling the banks stock-holders about the effect of these notes on the bank? Explain by reference to the schedules prepared in Requirements 1 and 2.arrow_forward
- Note Payable and Accrued Interest Fairbome Company borrowed $60,000 on an 8%, interest-bearing note on October 1, 2019. Fairborne ends its fiscal year on December 31. The note was paid with interest on May 1, 2020. Required: 1. Prepare the entry for this note on October 1, 2019. 2. Prepare the adjusting entry for this note on December 31, 2019. 3. Indicate how the note and the accrued interest would appear in the balance sheet at December 31, 2019. 4. Prepare the entry to record the repayment of the note on May 1, 2020.arrow_forwardFuture Values and Long-Term Investments Portman Corporation engaged in the following transactions during 2020: a. On January 1, 2020, Portman deposited $12,000 in a certificate of deposit paying 6% interest compounded semiannually (3% per 6-month period). The certificate will mature on December 31, 2023 b. On January 1, 2020, Portman established an account with Lee County Bank. Portman will make quarterly payments of $2,500 to Lee beginning on March 31, 2020, and ending on December 31, 2021. Lee guarantees an interest rate of 8% compounded quarterly (2% per 3-month period). Required: 1. Prepare the cash flow diagram for each of these two investments. 2. Calculate the amount to which each of these investments will accumulate at maturity. (Note: Round answers to two decimal places.)arrow_forwardNotes Receivable and Income On January 1, 2019, Pitt Company sold a patent to Chatham Inc. which had a carrying value on Pitts books of 10,000. Chatham gave Pitt a 60,000, non-interest-bearing note payable in five equal annual installments of 12,000 with the first payment due and paid on January 1, 2020. There was no established price for the patent, and the note has no ready market value. The prevailing rate of interest for a note of this type at January 1, 2019, is 12%. Required: 1. Prepare a schedule showing the income or loss before income taxes that Pitt should record for the years ended December 31, 2019 and 2020. Show supporting computations in good form. 2. Next Level If Pitt inadvertently failed to discount the note and instead recorded it at its gross value, what would be the effect on income or loss before income taxes for the year ended December 31, 2019?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning