INTERMEDIATE ACCT (LL) IFRS W/ENGAGE
3rd Edition
ISBN: 9781119552147
Author: Kieso
Publisher: WILEY
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(Debtor/Creditor Entries for Continuation of Troubled Debt with New Effective Interest) Crocker Corp. owes D. Yaeger Corp. a 10-year, 10% note in the amount of $330,000 plus $33,000 of accrued interest. The note is due today, December 31, 2017. Because Crocker Corp. is in financial trouble, D. Yaeger Corp. agrees to forgive the accrued interest, $30,000 of the principal, and to extend the maturity date to December 31, 2020. Interest at 10% of revised principal will continue to be due on 12/31 each year.Assume the following present value factors for 3 periods.
Check the following image for value factors.
Instructions(a) Compute the new effective-interest rate for Crocker Corp. following restructure. (Hint: Find the interest rate that establishes approximately $363,000 as the present value of the total future cash flows.)(b) Prepare a schedule of debt reduction and interest expense for the years 2017 through 2020.(c) Compute the gain or loss for D. Yaeger Corp. and prepare a schedule of…
Concord Corp. owes $251,000 to Marigold Trust. The debt is a 10-year, 12% note due December 31, 2020. Because Concord Corp. is
in financial trouble, Marigold Trust agrees to extend the maturity date to December 31, 2022, reduce the principal to $204,000, and
reduce the interest rate to 7%, payable annually on December 31.
(a)
Prepare the journal entries on Concord's books on December 31, 2020, 2021, 2022.
(b) Prepare the journal entries on Marigold Trust's books on December 31, 2020, 2021, 2022.
Click here to view factor tables.
(Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer 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.)
(a) Date Account Titles and Explanation
Concord Corp.'s
2020
2021
2022
Notes Payable
Gain on Restructuring of Debt
Notes Payable
Cash
Notes…
Colt Company is indebted to Kent Company under an P8,000,000, 10%, 4 year note dated December 31, 2018. The interest of P800,000 was paid on December 31, 2019 and 2020. During 2021, Colt Company experienced financial difficulties and is likely to default unless concessions are made. On December 31, 2021, Kent Company agreed to restructure the debt as follows: A.Interest of P800,000 for 2021, due December 31, 2021 was made payable on December 31, 2022.B.Interest for 2022 was waived. C.The principal amount was reduced from P8,000,000 to P7,000,000.
1. What is the interest expense to be recognized for 2022?
2. The gain (loss) on extinguishment of debt is:
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- At January 1, 2020, Student Ltd owes Tuition Corp for a $120,000 note payable. The note bears interest at 10%, payable annually, and the principal balance is due December 31, 2021. The market rate for comparable loans was, and continues to be, 10%. Interest has been paid to December 31, 2019. Student is now in financial difficulty and may not be able to repay Tuition. To promote payment, Tuition agrees to restructure the note, reducing the interest to 7% payable annually, reducing the principal balance to $100,000 and extending the term to December 31, 2024. a) Assume the restructuring is significant. Prepare all required journal entries on Student's books for the note in 2020, Including the December 31 interest payment. b) Assume same restructuring as above except that the principal amount only dropped to $115,000. At this level, the restructuring of the note is not a significant change. Prepare all required journal entries on Student's books for the note in 2020. 25 MacBook Alr esc…arrow_forward(Debtor/Creditor Entries for Modification of Troubled Debt) Vargo Corp. owes $270,000 to First Trust. The debt is a 10-year, 12% note due December 31, 2017. Because Vargo Corp. is in financial trouble, First Trust agrees to extend the maturity date to December 31, 2019, reduce the principal to $220,000, and reduce the interest rate to 5%, payable annually on December 31.Instructions(a) Prepare the journal entries on Vargo’s books on December 31, 2017, 2018, 2019.(b) Prepare the journal entries on First Trust’s books on December 31, 2017, 2018, 2019.arrow_forwardIn 2019, Ulna Company borrowed P10,000,000 from Plenty Lending Company to finance the construction of its facilities and for its operations with a stated rate of 10%. On the due date on December 31, 2022, Ulna owed interest for 2022, and the P10,000,000 principal. Ulna was in financial difficulty and was unable to make any payments. Ulna and Plenty agreed to amend the term of the note. The total interest due on December 31, 2022 is forgone. The principal was reduced to P9,000,000 and the maturity extended to December 31, 2026. However because of this concession the interest rate was increased to 12%. Relevant present value factors related to this note are as follows: the present value of 1 for 4 periods at 10% is .68, while the present value for an ordinary annuity at 10% for 4 periods is 3.17. As a result of the debt restructure, what amount should Ulna Company report as pretax gain in its 2022 income statement? a. 1,456,400 c. 956,400 b. 1,001,400 d. 0arrow_forward
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