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Calculate the total amount of interest expense recorded

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Question -

Part A - On December 31, 2013 Nat Sass Inc (NSI) restructures a $1178073 debt with its bank (A note payable of $1100000 plus accrued interest o $78073). The bank (1) forgives the $78073 of accrued interest and $100000 o principal, (2) extends the maturity date from December 31, 2014 to December 31, 2016, and (3) reduces the interest rate from 10% to the market interest rate (8%) which is to be paid annually.

1. Prepare the journal entry to record this restructuring on December 31, 2013.

2. Prepare any necessary journal entry on December 31, 2014.

3. Assume NSI was allowed the terms stated above except the new stated interest rate was reduced to 3%. Calculate the gain to be recognized in any on December 31, 2013.

Part B - Sass issued 5 year $100000 face value bonds paying semiannual interest with a stated rate of 4%. The company sold these bonds on January 1, 2013 when the market interest rate was 5%.

Calculate the total amount of interest expense recorded for the year ended December 31, 2013.

Reference no: EM131997193

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