othschild Chair Company, was indebted to First Lincoln Bank under a $20 million, 10% unsecured note. The note was signed January 1, 2011, and was due December 31, 2024. Annual interest was paid on December 31, 2019. At January 1, 2021, Rothschild Chair Company was experiencing severe financial difficulties and negotiated a restructuting of the terms of the debt agreement. REQUIRED: Prepare all journal entries by First Lincoln Bank to record the restructuring and any remaining transactions, for current and future years, relating to the debt under each of the independent circumstances below: 1.-First Linconl Bank agreed to settle the debt in exchange for land having a fair value of $16 million but carried on Rothschild Chair company's book at $13 million 2.-First Lincoln Bank agreed to a) forgive the interest accrued from last year, b) reduce the remaining four interest payments to $1 million each, and c) reduce the principal to $15 million
othschild Chair Company, was indebted to First Lincoln Bank under a $20 million, 10% unsecured note. The note was signed January 1, 2011, and was due December 31, 2024. Annual interest was paid on December 31, 2019. At January 1, 2021, Rothschild Chair Company was experiencing severe financial difficulties and negotiated a restructuting of the terms of the debt agreement. REQUIRED: Prepare all journal entries by First Lincoln Bank to record the restructuring and any remaining transactions, for current and future years, relating to the debt under each of the independent circumstances below: 1.-First Linconl Bank agreed to settle the debt in exchange for land having a fair value of $16 million but carried on Rothschild Chair company's book at $13 million 2.-First Lincoln Bank agreed to a) forgive the interest accrued from last year, b) reduce the remaining four interest payments to $1 million each, and c) reduce the principal to $15 million
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Rothschild Chair Company, was indebted to First Lincoln Bank under a $20 million, 10% unsecured note. The note was signed January 1, 2011, and was due December 31, 2024. Annual interest was paid on December 31, 2019. At January 1, 2021, Rothschild Chair Company was experiencing severe financial difficulties and negotiated a restructuting of the terms of the debt agreement.
REQUIRED:
Prepare all
1.-First Linconl Bank agreed to settle the debt in exchange for land having a fair value of $16 million but carried on Rothschild Chair company's book at $13 million
2.-First Lincoln Bank agreed to a) forgive the interest accrued from last year, b) reduce the remaining four interest payments to $1 million each, and c) reduce the principal to $15 million
Transcribed Image Text:ROTHSCHILD CHAIR COMPANY, INC.
General Journal
Account
Debit
Credit
January 1, 2021
Bad debt expense
Interest receivable
Allowance for uncollectible accounts
December 31, 2021
Cash
Allowance for uncollectible accounts
Interest revenue
December 31, 2022
Cash
Allowance for uncollectible accounts
Interest revenue
December 31, 2023
Cash
Allowance for uncollectible accounts
Interest revenue
December 31, 2024
Cash
Allowance for uncollectible accounts
Interest revenue
Cash
Allowance for uncollectible accounts
Amortization Schedule
Cash
Effective
Increase in
Interest
Interest
Ralance
Outstandina
Transcribed Image Text:ROTHSCHILD CHAIR COMPANY, INC.
General Journal
Account
Requirement 1:
Debit
Credit
Land
Bad debt expense
Notes receivable
Accrued interest receivable
Requirement 2:
ROTHSCHILD CHAIR COMPANY, INC.
Analysis
Previous Value:
Accrued 2020 interest
Principal
Carrying amount of the receivable
New Value:
Interest
Principal
Present value of the receivable
Loss:
ROTHSCHILD CHAIR COMPANY, INC.
General Journal
Account
Debit
Credit
lanuan 1 2021
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