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What circumstances can zurich international bank

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Reference no: EM133291259

(Loan Impairment Entries) On January 1, 2020, Octopus Company issued a $2,000,000, 6-year, zero-interestbearing note to Zurich International Bank. The note was issued to yield 6% annual interest. Unfortunately, during 2021, Octopus fell into financial trouble due to increased competition. After reviewing all available evidence on December 31, 20 , Zurich International Bank decided that the loan was impaired. Octopus will probably pay back only $950,000 of the principal at maturity.

1. Compile journal entries for both Octopus Company and Zurich International Bank to record the issuance of the note on January 1, 2020.

2. Assuming that both Octopus Company and Zurich International Bank use the effective-interest method to amortize the discount, prepare the amortization schedule for the note.

3. Under what circumstances can Zurich International Bank consider Octopus' note to be impaired?

4. Compute the loss Zurich International Bank will suffer from Octopus' financial distress on December 31, What journal entries should be made to record this loss?

Reference no: EM133291259

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