On December 31, 2025, American Bank enters into a debt restructuring agreement with Martinez Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $3,540,000 note receivable by the following modifications: Reducing the principal obligation from $3,540,000 to $2,832,000. Extending the maturity date from December 31, 2025, to January 1, 2029. Reducing the interest rate from 12% to 10%. Martinez pays interest at the end of each year. On January 1, 2029, Martinez Company pays $2,832,000 in cash to American Bank. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) 1:Assuming that the interest rate Martinez should use to compute interest expense in future periods is 1.4276 %, prepare the interest payment schedule of the note for Martinez Company after the debt restructuring. (Round answers to 0 decimal places, e.g. 38,548.) 1.1 Prepare the interest payment entry for Martinez Company on December 31, 2027. (Round answers to 0 decimal places, e.g . 38,548. 1.2 What entry should Martinez make on January 1, 2029? (Round answers to O decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List debit entry before credit entry.) December 31,2029
On December 31, 2025, American Bank enters into a debt restructuring agreement with Martinez Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $3,540,000 note receivable by the following modifications: Reducing the principal obligation from $3,540,000 to $2,832,000. Extending the maturity date from December 31, 2025, to January 1, 2029. Reducing the interest rate from 12% to 10%. Martinez pays interest at the end of each year. On January 1, 2029, Martinez Company pays $2,832,000 in cash to American Bank. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) 1:Assuming that the interest rate Martinez should use to compute interest expense in future periods is 1.4276 %, prepare the interest payment schedule of the note for Martinez Company after the debt restructuring. (Round answers to 0 decimal places, e.g. 38,548.) 1.1 Prepare the interest payment entry for Martinez Company on December 31, 2027. (Round answers to 0 decimal places, e.g . 38,548. 1.2 What entry should Martinez make on January 1, 2029? (Round answers to O decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List debit entry before credit entry.) December 31,2029
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On December 31, 2025, American Bank enters into a debt restructuring agreement with Martinez Company, which is now
experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $3,540,000 note receivable by the following
modifications:
Reducing the principal obligation from $3,540,000 to $2,832,000.
Extending the maturity date from December 31, 2025, to January 1, 2029.
Reducing the interest rate from 12% to 10%.
Martinez pays interest at the end of each year. On January 1, 2029, Martinez Company pays $2,832,000 in cash to American Bank.
If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically
indented
when the amount is entered. Do not indent manually. List all debit entries before credit entries.)
1:Assuming that the interest rate Martinez should use to compute interest expense in future periods is 1.4276 %, prepare the
interest payment schedule of the note for Martinez Company after the debt restructuring. (Round answers to 0 decimal places, e.g.
38,548.)
1.1 Prepare the interest payment entry for Martinez Company on December 31, 2027. (Round answers to 0 decimal places, e.g
. 38,548.
1.2 What entry should Martinez make on January 1, 2029? (Round answers to O decimal places, e.g. 38,548. If no entry is required,
select
"No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is
entered.
Do not indent manually. List debit entry before credit entry.)
December
31,2029
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