On 31st december 2010 the american bank enters into a debt

Assignment Help Financial Accounting

Reference no: EM13370967

On 31st December, 2010, the American Bank enters into a debt restructuring agreement with Barkley Company, which is now experiencing financial trouble. The bank agrees to restructure a 12 percent, issued at par, $3,000,000 note receivable by the subsequent modifications:
1. Reducing principal obligation from $3,000,000 to $2,400,000.
2. Extending maturity date from 31st December, 2010, to 1st January, 2014.
3. Reducing the interest rate from 12% to 10%.

Barkley pays interest at the end of each year. On 1st January, 2014, Barkley Company pays $2,400,000 in cash to Firstar Bank.

Instructions
(a) Will the increase recorded by Barkley be equal to the loss recorded by American Bank under the debt restructuring?

(b) Will Barkley Company record a gain under the term modification mentioned above? Clarify.

(c) Suppose that the interest rate Barkley should use to compute interest expense in future periods is 1.4276 percent, prepare the interest payment schedule of the note for Barkley Company after the debt restructuring.

(d) Prepare interest payment entry for Barkley Company on 31st December, 2012.

(e) What entry should Barkley make on 1st January, 2014?

Reference no: EM13370967

Questions Cloud

Pro golf warehouse inc pgw sells gold equipment all through : pro golf warehouse inc. pgw sells gold equipment all through the united states. pgw also sells golf equipment in canada

The dempere imports companys eps in 2011 was 300 and in : the dempere imports companys eps in 2011 was 3.00 and in 2006 it was 1.80. the companys payout ratio is 30 percent

A promissory note has outstanding payments of 650 at the : a promissory note has outstanding payments of 650 at the end of each of the next 5 years. what market price would be

A explain the federal gift and estate taxes what is the : a. explain the federal gift and estate taxes. what is the purpose of the federal gift tax? what is the reason of the

On 31st december 2010 the american bank enters into a debt : on 31st december 2010 the american bank enters into a debt restructuring agreement with barkley company which is now

Shown below are 3 independent situations answer the : shown below are 3 independent situations. answer the question at the end of each situation.1. during 2010 maverick

The michelle cook law firm uses a client database assume : the michelle cook law firm uses a client database. assume michelle cook paid 5000 for a computer.requirements1. explain

Find the effects be of the overall transactions on reported : find the effects be of the overall transactions on reported income for 2009? why would steinbach take these actions?is

Eastwood company a us based company has subsidiaries in 3 : eastwood company a us based company has subsidiaries in 3 countries x y and z. all three subsidiaries sell and

User Account

All Pages