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Prepare the journal entry that jkl ltd would make

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Reference no: EM132885032

JKL Ltd has financial difficulties and has asked Sang Hang Bank to restructure its $6 million note outstanding. The current note has 3 years left and pay a current interest of 10%, the current market rate for similar loan is 14%. The note was issued at its face value.

There are three independent alternatives that Sang Hang Bank could agree as follows:

  • to accept the property in exchange for giving up its claim on the note. The property has carrying amount of $4.5 million and a fair value of $5 million.
  • to take an equity in JKL Ltd by accepting ordinary shares valued at $4.2 million (at stated value) in exchange for giving up its claim on this note.
  • to modify the terms of the note, indicating that JKL Ltd does not have to pay any interest on the note over the 3 year period.

Required

Problem 1: Prepare the journal entry that JKL Ltd would make for each of above proposed restructurings.

Reference no: EM132885032

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