Reference no: EM132886435
Question -
Q1. On December 31, 2005, Goldcoast bank agreed to restructure an $800,000, 10% loan receivable from Fielding Corporation because of Fielding's financial problems. The loan was issued at par and at December 31, there was $40,000 of accrued interest for a six- month period. Terms of the restructuring agreement are as follows:
** Reduce the loan from $800,000 to $600,000;
** Extend the maturity date by 2 years from December 31, 2005 to December 31, 2007; and, ** Reduce the interest rate on the loan from 10% to 6%. Present value assumptions:
Present value of $1 for 2 years at 6% = 0.8900
Present value of $1 for 2 years at 10% = 0.8264
Present value of an annuity of $1 for 2 years at 6% = 1.8334
Present value of an annuity of $1 for 2 years at 10% = 1.7355
Required -
1. What amount of gain or loss from restructuring the loan will Fielding report for 2005?
2. Compute the gain or loss that will be reported by Goldcoast Bank. Assume that the bank has not recognized an impairment before the restructuring.
Q2. Jones Corporation is being liquidated under Chapter 7 of the Bankruptcy Act. The trustee has determined that the unsecured claims will receive $.50 on the dollar. Kevin corporation holds a $200,000 mortgage note receivable from Jones that is secured by marketable securities with a $150,000 book value and a $164,000 fair value. How much of the mortgage receivable will Kevin recover?
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