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Compute the loss national bank will suffer

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Reference no: EM133189038

Question - Devil Red Corp. has the following items in the stockholders' equity portion of its statement of financial position as of December 31, 2020, after all necessary year- end closing entries:

On December 31, 2020, National Bank enters into a debt restructuring agreement with Masterlock Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $3,600,000 note receivable by the following modifications:

1. Reducing the principal obligation from $3,600,000 to $2,430,000.

2. Extending the maturity date from December 31, 2020, to January 1, 2024.

3. Reducing the interest rate from 12% to 10%.

Masterlock pays interest at the end of each year. On January 1, 2024, Masterlock Company pays $2,430,000 in cash to National Bank.

Required - Answer the following questions related to National Bank (creditor). Compute the loss National Bank will suffer under this new term modification.

Reference no: EM133189038

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