Carla Vista Corp. currently has an issued debenture outstanding with Abbra Bank. The note has a principalof $4 million, it was issued at face value, and interest is payable at 7%. The term of the debenture was 10years, and it was issued on December 31, 2016. The current market rate for this debenture is 9%. CarlaVista has been experiencing financial difficulties and has asked Abbra Bank to restructure the note. BothCarla Vista and Abbra Bank prepare financial statements in accordance with IFRS. It is currentlyDecember 31, 2023.For each of the following independent situations related to the above scenario, prepare the journal entriesthat Carla Vista and Abbra Bank would make for the restructuring that is described. (d)Abbra Bank agrees to reduce the principal to $1.7 million and require interest only in the third year at4%, waiving the first 2 years' worth of interest. (Hint: Refer to Chapter 3 for tips on calculating and usethe time value of money tables.) Assume that the bank had not previously recognized any loss onimpairment. (Credit account titles are automatically indented when the amount is entered. Do not indentmanually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List alldebit entries before credit entries.)On the books of Carla Vista Corporation:ccount Titles and ExplanationOn the books of Abbra Bank:ccount Titles and ExplanationDebitDebitCrediCredit

Carla Vista Corp. currently has an issued debenture outstanding with Abbra Bank. The note has a principal of $4 million, it was issued at face value, and interest is payable at 7%. The term of the debenture was 10 years, and it was issued on December 31, 2016. The current market rate for this debenture is 9%. Carla Vista has been experiencing financial difficulties and has asked Abbra Bank to restructure the note. Both Carla Vista and Abbra Bank prepare financial statements in accordance with IFRS. It is currently December 31, 2023.

Carla Vista Corp. currently has an issued debenture outstanding with Abbra Bank. The note has a principal of $4 million, it was issued at face value, and interest is payable at 7%. The term of the debenture was 10 years, and it was issued on December 31, 2016. The current market rate for this debenture is 9%. Carla Vista has been experiencing financial difficulties and has asked Abbra Bank to restructure the note. Both Carla Vista and Abbra Bank prepare financial statements in accordance with IFRS. It is currently December 31, 2023.

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Carla Vista Corp. currently has an issued debenture outstanding with Abbra Bank. The note has a principal
of $4 million, it was issued at face value, and interest is payable at 7%. The term of the debenture was 10
years, and it was issued on December 31, 2016. The current market rate for this debenture is 9%. Carla
Vista has been experiencing financial difficulties and has asked Abbra Bank to restructure the note. Both
Carla Vista and Abbra Bank prepare financial statements in accordance with IFRS. It is currently
December 31, 2023.
For each of the following independent situations related to the above scenario, prepare the journal entries
that Carla Vista and Abbra Bank would make for the restructuring that is described.

(d)
Abbra Bank agrees to reduce the principal to $1.7 million and require interest only in the third year at
4%, waiving the first 2 years' worth of interest. (Hint: Refer to Chapter 3 for tips on calculating and use
the time value of money tables.) Assume that the bank had not previously recognized any loss on
impairment. (Credit account titles are automatically indented when the amount is entered. Do not indent
manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all
debit entries before credit entries.)
On the books of Carla Vista Corporation:
ccount Titles and Explanation
On the books of Abbra Bank:
ccount Titles and Explanation
Debit
Debit
Credi
Credit

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