Alpha Corporation is having financial difficulty and therefore has asked Bahrain National Bank to restructure BD5,000,000 note outstanding. The current outstanding note has 3 years remaining and pays a current rate of interest of 10%. The present markert 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 BD6,700,000 and have a par value of BD3,000,000. B) Bahrain Natlonal 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 B03,588,900.
Alpha Corporation is having financial difficulty and therefore has asked Bahrain National Bank to restructure BD5,000,000 note outstanding. The current outstanding note has 3 years remaining and pays a current rate of interest of 10%. The present markert 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 BD6,700,000 and have a par value of BD3,000,000. B) Bahrain Natlonal 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 B03,588,900.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Alpha Corporation is having financial difficulty and therefore has asked Bahrain National Bank to restructure BDS,000,000 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 BD6,700,000
and have a par value of BD3,000,000.
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 BD3,588,900.
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