At January 1, 2018, Brainard Industries, Inc., owed Second BancCorp $12 million under a 10% note due December 31, 2020. Interest was paid last on December 31, 2016. Brainard was experiencing severe financial difficultiesand asked Second BancCorp to modify the terms of the debt agreement. After negotiation Second BancCorpagreed to:a. Forgive the interest accrued for the year just ended.b. Reduce the remaining two years’ interest payments to $1 million each and delay the first payment untilDecember 31, 2019.c. Reduce the unpaid principal amount to $11 million.Required:Prepare the journal entries by Brainard Industries, Inc., necessitated by the restructuring of the debt at (1) January1, 2018; (2) December 31, 2019; and (3) December 31, 2020.
At January 1, 2018, Brainard Industries, Inc., owed Second BancCorp $12 million under a 10% note due December 31, 2020. Interest was paid last on December 31, 2016. Brainard was experiencing severe financial difficulties
and asked Second BancCorp to modify the terms of the debt agreement. After negotiation Second BancCorp
agreed to:
a. Forgive the interest accrued for the year just ended.
b. Reduce the remaining two years’ interest payments to $1 million each and delay the first payment until
December 31, 2019.
c. Reduce the unpaid principal amount to $11 million.
Required:
Prepare the
1, 2018; (2) December 31, 2019; and (3) December 31, 2020.
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