Reference no: EM132482965

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:

Question 1: Prepare the journal entries for Oakwood to record the debt restructuring agreement and all subsequent interest payments assuming the following independent alternatives:

Point 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%.

Point 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%.

Point 3. The bank accepts 160,000 shares of Oakwood's $5 par value common stock, which is currently selling for $14.50 per share, in full settlement of the debt.

Point 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 Oakwood's books at a cost of $2,200,000.