On 1/1/2020, the Key Bank granted a loan to XYZ Company of $5,000,000 with 10% interest payable at endof each year (12/31...). The loan due after 4 years and XYZ Company signed a note payable for the loanamount. XYZ was able to pay the interest for 2020 and 2021. At end of year 3 (2022), XYZ Company was Ifinancial difficulty and did not pay due interest. In January 2023 (beginning of year 4, the Key bankassessed the loan situation and agreed with XYZ to restructure the loan as follows:a. Forgive the accrued interest of year 3b. Extend the maturity of the note 2 more yearsc. Reduce interest rate to $300,000 a yeard. Reduce the principal of the loan to $3,000,000.Required:Make the necessary restructuring entries to implement the agreement in the books of both:a. The bank:b. XYZ Company

Step 1 Journal is the part of book keeping. Note: There is no journal for the extend of maturity of…

Answered: Make the necessary restructuring…

Business

Accounting

Make the necessary restructuring entries to implement the agreement in the books of both: a. The bank b. XYZ Company

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: the core principle of the new accounting standard (IFRS 16) is that an entity shall recognise assets…

A: Lease is an agreement between two parties lessor and lessee. Lessor provides its asset for use to…

Q: Explain the relation between balance sheet, income statements, and changes in equity statements on a…

A: Step 1: Financial statements include: The income statement which includes the summary of revenues…

Q: definition and recognition criteria of liabilities

A: Liability is the obligation to be repaid or loss to be met in future.

Q: Give at least 3 examples of businesses who had undergone merger or consolidation. It can be…

A: Merger and consolidation are two similar terms used in business and finance to describe the…

Q: Which of the following dictates how the revenue from the sale of production will be distributed:

A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period…

Q: , IFRS Financial Instruments One of the following is not within the scope of the standard

A: The scope of the standard applies to all financial instrument except: 1. Interest associated with an…

Q: Explain the differences between IFRS and US GAAP in process of business acquisitions and…

A: Accounting standards are the rules and guidelines used by the business to prepare financial…

Q: Define each of the following terms:a. Informal restructuring; reorganization in bankruptcy

A: Informal restructuring is a method by which a financially ailing company comes into contract with…

Q: 8. During the post-merger integration of two companies, which of the following activities support a…

A: Answer- Option (e) All of the above will be the most viable option.

Q: Compare and contrast the letters of credit and performance bonds. b) Discuss the following…

A: Letters of Credit Performance Bonds Definition A letter of credit is a financial guarantee…

Q: (Based on Appendix 14B) The way a debtor accounts for the restructuring depends on the extent of the…

A: Trouble debt restructuring: When the unique terms of a debt agreement is encouraged by the financial…

Q: A parent company is required to prepare consolidated financial statement for the group according to…

A: Consolidation is the process of combining the financial statements of a parent company and its…

Q: The components of other comprehensive income include: a. Changes in revaluation surplus b.…

A: Other comprehensive income - Income / Expenses that does not recognized in the profit and loss…

Q: Describe the Oman Companies Formation act and procedure?

A: Oman companies Formation act and procedure

Q: hich of the following statement about expected vesting period agrees with IFRS 2?

Q: uaranty constituted to guarantee the obligation of a guarantor: a. Legal guaranty b. Conventional…

A: Solution: Guaranty constituted to guarantee the obligation of a guarantor is "Double or…

Q: e the options for financing the acquisition of the franchisee's operatio

A: Offering both the flexibility and independence of owning a small business, as well as the support…

Q: What principle(s) from the conceptual framework does Henday Limited use in each of the following…

A: Conceptual framework is a concept with several variations and contexts.It basically helps you to…

Q: Accounting for operating capital lease. What are the issues that the accountant faces in recording…

A: Operating lease gets different accounting treatment both for the lessor and the lessee. They are as…

Q: When acquiring a business, typically all of the assets and liabilities will be acquired, even those…

A: However, the following two exceptions would apply:1. The acquirer company would recognize an…

Q: Under what circumstances would a transaction be recorded as a troubled-debt restructuring by only…

A: Debt: Debt is the amount owed by the company for a particular period from the date of the company's…

Q: Which of the following legislation that are not connected to debts payment and/or solvency of the…

A: Answer: Option c. Companies Act 2016 is correct

Q: Creative negotiation techniques that establish deal structure such as offering owner financing , a…

A: Negotiation is defined as the style of discussion factors, where individuals have an effort to…

Q: The IASB and FASB are collaborating on a joint project to revise accounting standards for leases.…

Q: 1.- Why are bonds treated as retired during the consolidation process? 2.- How long-term…

A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…

Q: WHAT IS A CONCESSIONARY LOAN? Select one O a A LOAN FROM THE PARENT COMPANY TO ITS RIVAL COMPANIES…

A: In this question, we are required to determine what a concessionary loan means.

Q: In negotiating and effecting a troubled debt restructuring, the creditor usually incurs various…

A: 1. The relevant authoritative literature on the accounting treatment of legal fees incurred by a…

Q: What has been the likely effect of the Gramm-LeachBliley Act on financial consolidation?

A: The Gramm-Leach Bliley act is a act that has been enacted in order to explain the provisions of the…

Q: The report should contain the following : -Introduction about the banks -Reasons for merger -…

A: The bank is a financial institution that helps in wealth creation through investments. Also, banks…

Q: In a sale-leaseback transaction, the owner of an asset sells it and immediately leases it back from…

A: 1.

Q: Which of the following are exceptions for PFRS 9 application? CHOICES Contracts to buy or sell…

A: The following are exceptions for PFRS 9 application?:: Contracts that were entered into and…

Q: Which of the following scenarios are possible for an entity to have: 1. Deficit & debt 2. Deficit &…

A: The concept of deficit in finance is an important part of the decision making as it is related to…

Q: Which of the following is NOT a required disclosure for any entity that holds an interest in a VIE?…

A: The Financial Accounting Standards Board (FASB) has provided guidance for disclosure requirements…

Q: Which of the following shall an entity disclose for loans payable recognized at the end of the…

A: Disclosures about conditions that existed at the end of the reporting period should be updated in…

Q: Which of the following statements is true about goodwill? O a. Goodwill may be recorded when it is…

A: Goodwill is recorded when one company acquires another in a business combination and amount of…

Q: If a company is not required to follow U.S. GAAP, a statement of realization and liquidation can be…

Q: Which would be the appropriate section in the codification for the following: "Borrowings…

A: The Financial Accounting Standards Board (FASB) is an accounting body whose main purpose is to set,…

Q: In which group are the liabilities of the company with and without bill arising from relations with…

A: Any liability of the business which is being payable to third party and Main purpose of these…

Question

On 1/1/2020, the Key Bank granted a loan to XYZ Company of $5,000,000 with 10% interest payable at end
of each year (12/31...). The loan due after 4 years and XYZ Company signed a note payable for the loan
amount. XYZ was able to pay the interest for 2020 and 2021. At end of year 3 (2022), XYZ Company was I
financial difficulty and did not pay due interest. In January 2023 (beginning of year 4, the Key bank
assessed the loan situation and agreed with XYZ to restructure the loan as follows:
a. Forgive the accrued interest of year 3
b. Extend the maturity of the note 2 more years
c. Reduce interest rate to $300,000 a year
d. Reduce the principal of the loan to $3,000,000.
Required:
Make the necessary restructuring entries to implement the agreement in the books of both:
a. The bank:
b. XYZ Company

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Explain whether a subsidiary needs to prepare accounts to the same date as the parent company.
Explain the ‘qualifying asset’ and how do we treat exchange rate differences relating to the acquisition of qualifying assets? Compare and contrast this with the treatment for assets that are not qualifying assets?Give your answer as per AASB 123
Conceptual Framework and Reporting Standard: Small and Medium Sized Enterprise 1. In SME, borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds. True or False? 2. Provision, in SME, shall be recognized if an entity has an obligation at the reporting date as a result of a past event and it is possible that the entity will be required to transfer economic benefits in settlement. True or False? 3. An entity can compute post-employment benefit by using either defined benefit plan or defined contribution plan. True or False?
When a company undergoes liquidation, the order of preference in which creditors are paid is crucial. Describe the hierarchy of payments to different classes of creditors and explain why this sequence is significant in the context of company liquidation.
Access the FASB Accounting Standards Codification at the FASB website ( www.fasb.org ). Determine the specificcitation for accounting for each of the following items:1. Definition of a bargain purchase option.2. The calculation of the lessor’s gross investment in a sales-type lease.3. The disclosures required in the notes to the financial statements for an operating lease.4. The additional disclosures necessary in the notes to the financial statements if the operating lease has a leaseterm greater than one year.
Explain the similarities and differences between the typical use of a repurchase agreement and Lehman Brothers’ use of Repo 105.
TRUE OR FALSE?An entity is solvent if it can pay its currently maturing obligation.
Using practical examples describe how International Accounting Standard 23 would apply to Assets in your company?
36. In the following liabilities, the payee is known, however, the amount may have to be estimated. Which is the exception? a. provision for restructuring costs b. provision for decommissioning costs c. provision for staff bonus d. liability on customer loyalty credits
state and explain six factors that make information useful
11. Which is an incorrect scenario on covenants?a. The issuing firms pursued revenue generating projects to ensure payment of the interest and theprincipal on a timely basis.b. The issuing firm disposes a mortgage on a bond to settle other creditors’ claims to preventinsolvency.c. The issuing firm submitted periodic reports to the trustee bank to fulfill the loan agreement.d. The issuing firm disposed the collateral to settle the agreement with the bondholders.e. B & Df. All of the aboveg. None of the above 12. Statement 1: Bond issuers can take additional loans against the properties that were considered ascollaterals for the bonds.Statement 2: Bond issuers can impose the taxes paid for registering the bonds against on the interestand principal claims of the bondholders.Statement 3: Bond issuers can prioritize other claims of other creditors over the bondholders in casesof bankruptcy. Statement 4: Bond issuers can pay dividends of shareholders even though the bondholders were…
a contract that is negotiated direclty between a borrowing firm and a bank and under which the borrower agrees to make a series of interest and principal payments to the bank on specific dates is called: