Reference no: EM133075160
Question - Stiller Co., owed to Alberta Trust $11 million under a 13% note due December 31, 2015. Note was issued at par and interest is paid at the end of year. Stiller Co. was experiencing severe financial difficulties and asked Alberta Trust to renegotiate the terms of the debt agreement. After negotiation, Alberta Trust agreed to:
-Extend the maturity date to December 31, 2017.
-Reduce the principal amount to $10 million.
-Reduce the interest rate to 8%.Answer the following questions using the information given above. Please make sure your final answer(s) are accurate to the nearest whole number.
a) Determine if this is a settlement or a modification.
Present value of old debt
Present value of new debt
Difference as a percentage of the old debt %
This is a settlement or modification of terms?(Select one)
b) Prepare the journal entries by Stiller Co. on December 31, 2015 and 2016. Enter an appropriate description, and enter the date in the format dd/mmm (i.e., 15/Jan).
c) Prepare the journal entries for Alberta Trust on December 31, 2015 and 2016. Alberta Trust does not use an allowance account for the loss on restructuring. Enter an appropriate description, and enter the date in the format dd/mmm (i.e., 15/Jan).
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: Stiller Co., owed to Alberta Trust $11 million under a 13% note due December 31, 2015. Prepare the journal entries by Stiller Co. on December 31, 2015 and 2016
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