At January 1, 2021, Clayton Hoists Inc. owed Third BancCorp $12 million, under a 10% note due December 31, 2022. Interest was paid last on December 31, 2019. Clayton was experiencing severe financial difficulties and asked Third BancCorp to modify the terms of the debt agreement. After negotiation Third BancCorp agreed to do the following:∙ Forgive the interest accrued for the year just ended.∙ Reduce the remaining two years’ interest payments to $1 million each.∙ Reduce the principal amount to $11 million.Required:Prepare the journal entries by Third BancCorp necessitated by the restructuring of the debt at1. January 1, 2021.2. December 31, 2021.3. December 31, 2022.
At January 1, 2021, Clayton Hoists Inc. owed Third BancCorp $12 million, under a 10% note due December 31, 2022. Interest was paid last on December 31, 2019. Clayton was experiencing severe financial difficulties and asked Third BancCorp to modify the terms of the debt agreement. After negotiation Third BancCorp agreed to do the following:
∙ Forgive the interest accrued for the year just ended.
∙ Reduce the remaining two years’ interest payments to $1 million each.
∙ Reduce the principal amount to $11 million.
Required:
Prepare the
1. January 1, 2021.
2. December 31, 2021.
3. December 31, 2022.
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