Company "A" owes an amount of 450,000 riyals to Company "B" under a bill of exchange and the bill was at an interest rate of 12% per annum for 10 years due on 31/12/2014 and since Company "A" is facing financial problems, Company "B" agreed to extend the date The maturity date is December 31, 2016, with the debt value being reduced to 370,000 riyals, and the interest rate being reduced to 5%, to be paid annually on December 31, taking into account that the market interest rate is 8% per day. That date.
Company "A" owes an amount of 450,000 riyals to Company "B" under a bill of exchange and the bill was at an interest rate of 12% per annum for 10 years due on 31/12/2014 and since Company "A" is facing financial problems, Company "B" agreed to extend the date The maturity date is December 31, 2016, with the debt value being reduced to 370,000 riyals, and the interest rate being reduced to 5%, to be paid annually on December 31, taking into account that the market interest rate is 8% per day. That date.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Company "A" owes an amount of 450,000 riyals to Company "B"
under a bill of exchange and the bill was at an interest rate of 12%
per annum for 10 years due on 31/12/2014 and since Company "A"
is facing financial problems, Company "B" agreed to extend the date
The maturity date is December 31, 2016, with the debt value being
reduced to 370,000 riyals, and the interest rate being reduced to 5%,
to be paid annually on December 31, taking into account that the
market interest rate is 8% per day. That date.
required:
Preparation of journal entries in the books of Company "A" on
December 31, 2014, 2015 and 2016.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd3eb868c-8982-48ca-b302-9ecbf9f04adc%2Fcbbdd72d-d6cf-47fc-a3f8-1043072e75c6%2Ft522zt8_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Company "A" owes an amount of 450,000 riyals to Company "B"
under a bill of exchange and the bill was at an interest rate of 12%
per annum for 10 years due on 31/12/2014 and since Company "A"
is facing financial problems, Company "B" agreed to extend the date
The maturity date is December 31, 2016, with the debt value being
reduced to 370,000 riyals, and the interest rate being reduced to 5%,
to be paid annually on December 31, taking into account that the
market interest rate is 8% per day. That date.
required:
Preparation of journal entries in the books of Company "A" on
December 31, 2014, 2015 and 2016.
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