Alpha Corporation is having financial diffculty and therefore has asked Bahrain National Bank to restructur current outstanding note has 3 years remaining and pays a current rate of interest of 10%. The present market rate for a loan of this nature is 12%. The note was issued at its face value. Required: Prepare the journal entry that Alpha would make for the following independent cases. A) Bahrain National Bank agrees to take ordinary shares issued by Alpha in exchange for the outstanding note. The shares are valued at BD3,350,000 and have a par value of BD1,500,000. B) Bahrain National Bank agrees to modify the terms of the note, by extending the maturity date to 5 more years and reducing the interest rate to 2%. The fair value of the new note is BD1,794,450.
Alpha Corporation is having financial diffculty and therefore has asked Bahrain National Bank to restructur current outstanding note has 3 years remaining and pays a current rate of interest of 10%. The present market rate for a loan of this nature is 12%. The note was issued at its face value. Required: Prepare the journal entry that Alpha would make for the following independent cases. A) Bahrain National Bank agrees to take ordinary shares issued by Alpha in exchange for the outstanding note. The shares are valued at BD3,350,000 and have a par value of BD1,500,000. B) Bahrain National Bank agrees to modify the terms of the note, by extending the maturity date to 5 more years and reducing the interest rate to 2%. The fair value of the new note is BD1,794,450.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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please answer both subparts
Transcribed Image Text:Alpha Corporation is having financial difficulty and therefore has asked Bahrain National Bank to restructure BD2,500,000 note outstanding. The
current outstanding note has 3 years remaining and pays a current rate of interest of 10%. The present market rate for a loan of this nature is
12%. The note was issued at its face value.
Required: Prepare the journal entry that Alpha would make for the following independent cases.
A) Bahrain National Bank agrees to take ordinary shares issued by Alpha in exchange for the outstanding note. The shares are valued at
BD3,350,000 and have a par value of BD1,500,000,
B) Bahrain National Bank agrees to modify the terms of the note, by extending the maturity date to 5 more years and reducing the Interest cate
to 2%. The fair value of the new note is BD1,794,450.
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