On December 31, 2023, Crane Bank enters into a debt restructuring agreement with Troubled Inc., which is now experiencing financial trouble. The bank agrees to restructure a $1.3-million, 12% note receivable issued at par by the following modifications: 1. Reducing the principal obligation from $1.3 million to $1.04 million Extending the maturity date from December 31, 2023, to December 31, 2026 Reducing the interest rate from 12% to 10% 2. 3. Troubled pays interest at the end of each year. On January 1, 2027, Troubled Inc. pays $1.04 million in cash to Crane Bank for the principal. The market rate is currently 10%. Answer the following questions related to Crane Bank (the creditor). Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. What interest rate should Crane Bank use to calculate the loss on the debt restructuring? Interest rate %

On December 31, 2023, Crane Bank enters into a debt restructuring agreement with Troubled Inc., which is now experiencing financial trouble. The bank agrees to restructure a $1.3-million, 12% note receivable issued at par by the following modifications: 1. Reducing the principal obligation from $1.3 million to $1.04 million Extending the maturity date from December 31, 2023, to December 31, 2026 Reducing the interest rate from 12% to 10% 2. 3. Troubled pays interest at the end of each year. On January 1, 2027, Troubled Inc. pays $1.04 million in cash to Crane Bank for the principal. The market rate is currently 10%. Answer the following questions related to Crane Bank (the creditor). Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. What interest rate should Crane Bank use to calculate the loss on the debt restructuring? Interest rate %

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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