Reference no: EM132815388
Question - On December 31, 2020, Sheridan Bank enters into a debt restructuring agreement with Barkley Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $2,000,000 note receivable by the following modifications:
1. Reducing the principal obligation from $2,000,000 to $1,600,000.
2. Extending the maturity date from December 31, 2020, to January 1, 2024.
3. Reducing the interest rate from 12% to 10%.
Barkley pays interest at the end of each year. On January 1, 2024, Barkley Company pays $1,600,000 in cash to Sheridan Bank. Answer the following questions related to Sheridan Bank (creditor).
What interest rate should Sheridan Bank use to calculate the loss on the debt restructuring?
Compute the loss that Sheridan Bank will suffer from the debt restructuring.
Prepare the journal entry to record the loss.
Prepare the interest receipt schedule for Sheridan Bank after the debt restructuring.
Prepare the interest receipt entry for Sheridan Bank on December 31, 2022.
What entry should Sheridan Bank make on January 1, 2024?
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