At January 1, 2021, BB Industries, Inc., owed Second Bank $24 million, under a 10% note due December 31, 2022. Interest was paid last on December 31, 2019. BB was experiencing severe financial difficulties and asked Second Bank to modify the terms of the debt agreement. After negotiation Second Bank agreed to: Forgive the interest accrued for the year just ended, Reduce the remaining two years' interest payments to $2 million each and delay the first payment until December 31, 2022, and Reduce the principal amount to $22 million. Required: Prepare the journal entries by BB Industries, Inc. necessitated by the restructuring of the debt at January 1, 2021, December 31, 2022, and December 31, 2023.
At January 1, 2021, BB Industries, Inc., owed Second Bank $24 million, under a 10% note due December 31, 2022. Interest was paid last on December 31, 2019. BB was experiencing severe financial difficulties and asked Second Bank to modify the terms of the debt agreement. After negotiation Second Bank agreed to: Forgive the interest accrued for the year just ended, Reduce the remaining two years' interest payments to $2 million each and delay the first payment until December 31, 2022, and Reduce the principal amount to $22 million. Required: Prepare the journal entries by BB Industries, Inc. necessitated by the restructuring of the debt at January 1, 2021, December 31, 2022, and December 31, 2023.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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At January 1, 2021, BB Industries, Inc., owed Second Bank $24 million, under a 10% note due December 31, 2022. Interest was paid last on December 31, 2019. BB was experiencing severe financial difficulties and asked Second Bank to modify the terms of the debt agreement. After negotiation Second Bank agreed to:
- Forgive the interest accrued for the year just ended,
- Reduce the remaining two years' interest payments to $2 million each and delay the first payment until December 31, 2022, and
- Reduce the principal amount to $22 million.
Required:
Prepare the
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