Reference no: EM132955346

Problem - McD purchased $160,000 of ingredients from Supply store on January 2, 2018. Jensen paid $30,000 in cash and signed a three-year 10% note for the remaining $130,000 of the purchase price. The note specifies that payments of $26,000 plus interest be made each year on the anniversary date of the loan. McD made the required January 2, 2018 payment, but was unable to make the second payment on January 2, 2019 because of a downturn in the construction industry. At January 2, 2019, McD owed the Supply store $104,000 plus $10,400 interest that had been accrued by both companies on December 31, 2018. Rather than write off the note, Supply store agreed to restructure the loan as follows: one-time & Restructured note payable & of $95,000 on January 2, 2019 would satisfy the restructured note. Hint: We are basically switching the orginal agreement to a new one. (The restructuring should considered as a new contract).

Required - Prepare the journal entries made by McD on January 2, 2019 to record the restructuring of the note.