Gain-loss on the restructuring of the debt

Reference no: EM13257175

In the latter part of 2010, Odessa Company experienced severefinancial pressure and was in default of meeting interest paymentson long-term notes of $6,000,000 due on December 31, 2015. Theunamortized premium on December 31, 2010 was $935,000. Theinterest rate on the debt was 11%, payable semiannually on June 30and December 31. In an agreement with Modern InvestmentCorporation on December 31, 2010, Odessa obtained acceptance of achange in principal and interest terms for the remaining 5-yearlife of the notes. The changes in terms are as follows:

(a) a reduction inprincipal of $475,000

(b) a reduction in theinterest rate to 3%

Instructions:

1. Compute the gain/loss on the restructuring of the debt.

2. Prepare thejournal entries for the restructuring of the debt, payment ofinterest under the old terms, and the first two interest payments that Odessa wouldmake under the new terms.

Reference no: EM13257175

Questions Cloud

How does the media positively : The media, and Hollywood in particular, is one avenue in which the general public becomes familiar with the role of nurses. How does the media positively or negatively influence the public’s image of nursing?

Develop a marketing research project to gather data : Abraham Maslow sought to explain why people are driven by particular needs at particular times. How does Maslow's theory help marketers?

How much can you withdraw each month : How much can you withdraw each month during retirement assuming a 20-year withdrawal period?

Accounting equation to demonstrate the error : Use the accounting equation to show how Enron abused good accounting. Use a separate accounting equation to demonstrate WorldCom's error.

Gain-loss on the restructuring of the debt : Compute the gain/loss on the restructuring of the debt.

U.s. can regain its manufacturing predominance : Write your thought weather the U.S. can regain its manufacturing predominance in a globalized society

What is the brewster angle : When red light in a vacuum is incident at the Brewster angle on a certain type of glass, the angle of refraction is 29.2°. What is the Brewster angle

What would have happened if the supreme court : What would have happened if the Supreme Court had allowed the Connecticut Supreme Court decision to stand and followed Justice Black’s reason?

Identify the key segmentation variables for markets : A clock and watch manufacturing realizes that she is operating in the market for machines that measure time. How should this be segmented?

User Account

All Pages