a) What is the accounting nature of this transaction? Choices: Troubled debt restructuring or Extinguishment of debt? (b) Prepare the journal entry to record this refinancing: (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places e.g. 58,971.) (1) On the books of Sheffield Inc. (2) On the books of United Bank. Please fill in all the boxes displayed in the image- thank you!
Daniel Perkins is the sole shareholder of Sheffield Inc., which is currently under protection of the U.S. bankruptcy court. As a “debtor in possession,” he has negotiated the following revised loan agreement with United Bank. Sheffield Inc.’s $674,000, 11%, 10-year note was refinanced with a $674,000, 5%, 10-year note.
(a) What is the accounting nature of this transaction? Choices: Troubled debt restructuring or Extinguishment of debt?
(b) Prepare the
| (1) | On the books of Sheffield Inc. | |
| (2) | On the books of United Bank. |
Please fill in all the boxes displayed in the image- thank you!
(a)
The nature of accounting transactions is the Extinguishment of debt.
(b)(1)
There will be no entry on the books of Sheffield Inc.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
