Reference no: EM132591384
Question - On December 31, 2017, Green Bank enters into a debt restructuring agreement with Troubled Inc., which is now experiencing financial trouble. The bank agrees to restructure a $2-million, 12% note receivable issued at par by the following modifications:
1. Reducing the principal obligation from $2 million to $1.9 million
2. Extending the maturity date from December 31, 2017 to December 31, 2020
3. Reducing the interest rate from 12% to 10% Troubled pays interest at the end of each year.
On January 1, 2021, Troubled Inc. pays $1.9 million in cash to Green Bank. Troubled prepares financial statements in accordance with IFRS 9.
Instructions
(a) Using time value of money tables, a financial calculator, and computer spreadsheet functions, discuss whether or not Troubled should record a gain.
(b) Using a finnancial calculator and computer spreadsheet functions, calculate the rate of interest that Troubled should use to calculate its interest expense in future periods.
(c) Prepare the interest payment entry for Troubled on December 31, 2019.
(d) What entry should Troubled make on January 1, 2021?
Use the same information as above, assume now that Green Bank reduced the principal to $1.6 million rather than $1.9 million. On January 1, 2021, Troubled Inc. pays $1.6 million in cash to Green Bank for the principal. The market rate is currently 10%.
Instructions
(a) Using time value of money tables, a financial calculator, and computer spreadsheet functions, determine if Troubled can record a gain under this term modification. If yes, calculate the gain.
(b) Prepare the journal entries to record the gain on Troubled's books.
(c) What interest rate should Troubled use to calculate its interest expense in future periods?
(d) Prepare the amortization schedule of the note for Troubled after the debt restructuring.
(e) Prepare the interest payment entries for Troubled on December 31, 2018, 2019, and 2020.
(f) What entry should Troubled make on January 1, 2021?
|
Determine the quarterly payment necessary to repay
: Determine the quarterly payment necessary to repay a $25,500 loan if the interest is computed at a rate of 15% per year compounded quarterly
|
|
What is the company key objective
: What is the company's key objective (that is, are they focused on profits, market share, growth, brand positioning, etc.)?What products or services do they sell
|
|
What annual deposit will be required to accumulate
: If the first deposit is made at the end of this year, what annual deposit will be required to accumulate the $85 million
|
|
Determine taxable income in each of the instances
: Book income of $59,000 including capital gains of $5,000, a charitable contribution of $1,200, Determine taxable income in each of the instances
|
|
Prepare the journal entries to record the gain
: Prepare the journal entries to record the gain on Troubled's books. What entry should Troubled make on January 1, 2021
|
|
Record the opening entries in the general journal
: Jordan, a sole trader, had the following assets and liabilities on 1st May 2010. Record the opening entries in the general journal
|
|
Compute Grouse ending inventory using the FIFO method
: The invoice cost of goods on hand at the end of the year is $3 million. Compute Grouse's ending inventory using the FIFO method
|
|
Evaluate evidence-based human resource strategies
: Evaluate evidence-based human resource strategies in the application of operation management. Apply critical thinking to use principles of sound reasoning.
|
|
Discuss the statement regarding health care costs
: Discuss the following statement: "Health care costs are out of control in the United States, and increasing conflicts between employers and employees are.
|