2. Prepare the journal entry for the payment of the cash interest on December 31, 2018 on Short's books (the Debtor) Debit accounts Credit accounts Dr=Cr Debits Credits

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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On December 31, 2017, Short Co. is in financial difficulty and cannot pay a note due that day. It is a $2,000,000 face value note with $200,000 accrued interest payable to Bryan, Inc. The original market rate of interest on the note was 12.58613%. Bryan agrees to forgive the accrued interest, extend the maturity date (two years) to December 31, 2019, and reduce the interest rate to 4%. The present value of the restructured cash flows is $1,712,000 (using the original market rate). Do NOT add rows to the spreadsheet!
Discount   Cash    
Premium   Interest payable    
Par   Interest expense    
    Discount on bond payable    
Yes   Bonds payable    
No   Loss on redemption    
    Gain on redemptin    
         
Cash        
Interest payable        
Interest receivable        
Notes payable        
Gain on restructuring        
Loss on restructuring        
Discount on Note payable        
Premium on Note payable        
Bad debt expense        
Allowance for bad debts        
2. Prepare the journal entry for the payment of the cash interest on
December 31, 2018 on Short's books (the Debtor)
Debit accounts
Credit accounts
Dr=Cr
Debits
Credits
Transcribed Image Text:2. Prepare the journal entry for the payment of the cash interest on December 31, 2018 on Short's books (the Debtor) Debit accounts Credit accounts Dr=Cr Debits Credits
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