INTERMEDIATE ACCT (LL) IFRS W/ENGAGE
3rd Edition
ISBN: 9781119552147
Author: Kieso
Publisher: WILEY
expand_more
expand_more
format_list_bulleted
Question
error_outline
This textbook solution is under construction.
Students have asked these similar questions
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:
At January 1, 2021, Clayton Hoists Inc. owed Third BancCorp $12 million, under a 10% note due December 31, 2022. Interest was paid last on December 31, 2019. Clayton was experiencing severe financial difficulties and asked Third BancCorp to modify the terms of the debt agreement. After negotiation Third BancCorp agreed to do the following:∙ Forgive the interest accrued for the year just ended.∙ Reduce the remaining two years’ interest payments to $1 million each.∙ Reduce the principal amount to $11 million.Required:Prepare the journal entries by Third BancCorp necessitated by the restructuring of the debt at1. January 1, 2021.2. December 31, 2021.3. December 31, 2022.
Knowledge Booster
Similar questions
- On January 1, 2019, Northfield Corporation becomes delinquent on a 100,000, 14% note to First National Bank, on which 16,651 of interest has accrued. On January 2, 2019, the bank agrees to restructure the note. It forgives the accrued interest, extends the repayment date to December 31, 2021, and reduces the interest rate to 10%. Required: Prepare a schedule for Northfield to compute the annual interest expense in regard to the preceding note for each year of the restructuring agreement.arrow_forward(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…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_forward
- In 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_forwardAt January 1, 2024, Mahmoud Industries, Incorporated, owed Second BancCorp $12 million under a 10% note due December 31, 2026. Interest was paid last on December 31, 2022. Mahmoud was experiencing severe financial difficulties and asked Second BancCorp to modify the terms of the debt agreement. After negotiation Second BancCorp agreed to: Forgive the interest accrued for the year just ended. Reduce the remaining two years’ interest payments to $1 million each and delay the first payment until December 31, 2025. Reduce the unpaid principal amount to $11 million. Required: Prepare the journal entries by Mahmoud Industries, Incorporated, necessitated by the restructuring of the debt at (1) January 1, 2024; (2) December 31, 2025; and (3) December 31, 2026.arrow_forward(Debtor/Creditor Entries for Settlement of Troubled Debt) Gottlieb Co. owes $199,800 to Ceballos Inc. The debt is a 10-year, 11% note. Because Gottlieb Co. is in financial trouble, Ceballos Inc. agrees to accept some land and cancel the entire debt. The property has a book value of $90,000 and a fair value of $140,000.Instructions(a) Prepare the journal entry on Gottlieb’s books for debt restructure.(b) Prepare the journal entry on Ceballos’s books for debt restructure.arrow_forward
- At January 1, 2024, Mahmoud Industries, Incorporated, owed Second BancCorp $15 million under a 10% note due December 31, 2026. Interest was paid last on December 31, 2022. Mahmoud 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 for 2023 and 2024. b. Reduce the remaining two years' interest payments to $1 million each and delay the first payment until December 31, 2025. c. Reduce the unpaid principal amount to $14 million. Required: Prepare the journal entries by Mahmoud Industries, Incorporated, necessitated by the restructuring of the debt at (1) January 1, 2024; (2) December 31, 2025; and (3) December 31, 2026. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.arrow_forwardOn January 1, 2019, Lala Company received an P800,000, 8%, 2 year note from Move Corporation as settlement for an outstanding past due account. The interest is payable every December 31 and the interest due in 2019 were collected on time. In 2020, Move Corporation was in financial crisis, and as a result of this development, Lala Company expects that the interest accruing for 2020 will be collected and that only P600,000 of the principal amount will be collected in equal annual installment over the next three years starting December 31, 2021. As of December 31, 2020, the market rate of interest for a similar instrument is 9%. What amount of impairment loss/bad debts should Lala Company recognize on December 31, 2020 related to its note receivable?arrow_forwardAt January 1, 2021, NCI Industries, Inc. was indebted to First Federal Bank under a $240,000, 10% unsecured note. The note was signed January 1, 2014, and was due December 31, 2022. Annual interest was last paid on December 31, 2019. NCI was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. First Federal agreed to reduce last year’s interest and the remaining two years’ interest payments to $11,555 each and delay all payments until December 31, 2022, the maturity date.Required:Prepare the journal entries by NCI Industries, Inc., necessitated by the restructuring of the debt at: (1) January 1, 2021; (2) December 31, 2021; and (3) December 31, 2022.arrow_forward
- This Company defaulted in two annual interest payments on its P4,000,000 loan. Because of the default, the lender agrees on December 31, 2021 to restructure the loan as follows: The lender waives the repayment of the unpaid (simple) interest and any future interests. The loan, which is originally maturing in lump sum on December 31, 2021, will be due in four equal annual payments of P1,000,000, to start immediately. The original effective interest rate is 10%, equal to the stated rate on the original loan contract. The current market rate on December 31, 2021 is 12%. What amount of interest expense should This Company recognize in 2022?arrow_forwardAt January 1, 2021. Clayton Hoists Inc. owed Third BancCorp $12 million, under a 10% note due December 31, 2022. Interest was paid last on December 31, 2019. Clayton was experiencing severe financial difficulties and asked Third BancCorp to modify the terms of the debt agreement. After negotiation Third BancCorp agreed to do the following: Forgive the interest accrued for the year just ended, • Reduce the remaining two years' interest payments to $I million each. Reduce the principal amount to $11 million. Required: Prepare the journal entries by Third BancCorp necessitated by the restructuring of the debt at 1. January 1. 2021. 2. December 31, 2021. 3. December 31. 2022.arrow_forwardSwifty Corporation, a publicly-traded company, agreed to loan money to another company. On July 1, 2023, the company received a five-year promissory note with a face value of $519,000, paying interest at a face rate of 5% on July 1 each year. The note was issued to yield an effective interest rate of 6%. Swifty used the effective interest method of amortization for discounts or premiums, and the company's year-end is September 30. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. (a) Use 1. PV Tables, 2. a financial calculator, and 3. Excel functions to arrive at the amount to record the note receivable. (Round present value factor calculations to 5 decimal places, e.g. 1.2512. Round PV tables and Excel function answers to 0 decimal places, e.g. 8,971 and round Financial calculator answer to 2 decimal places, e.g. 89.71.) 1. 2. 3. Using PV tables Financial calculator Excel function $ tA $ LA LA $ Note…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 Learning
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning