Question 2B: Debt restructuring Kifer Corp. owes $450,000 (principal amount) to First Trust. The debt is a 10-year, 12% note that will mature on December 31, 20X2. Kifer Corp. is in financial trouble and has not been able to paid the interest for the year 20X0. On December 31, 20X1, First Trust agrees to extend the maturity date to December 31, 20X3, reduce the principal to $370,000, and reduce the interest rate to 9%, payable annually on December 31. Kifer's, market rate of interest is 10% at the time of the restructuring on Dec 31, 20X1. Required: Prepare the journal entries on Kifer's books on December 31, 20X1, 20X2, and 20X3.
Question 2B: Debt restructuring Kifer Corp. owes $450,000 (principal amount) to First Trust. The debt is a 10-year, 12% note that will mature on December 31, 20X2. Kifer Corp. is in financial trouble and has not been able to paid the interest for the year 20X0. On December 31, 20X1, First Trust agrees to extend the maturity date to December 31, 20X3, reduce the principal to $370,000, and reduce the interest rate to 9%, payable annually on December 31. Kifer's, market rate of interest is 10% at the time of the restructuring on Dec 31, 20X1. Required: Prepare the journal entries on Kifer's books on December 31, 20X1, 20X2, and 20X3.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Question 2B: Debt restructuring
Kifer Corp. owes $450,000 (principal amount) to First Trust. The debt is a 10-year, 12% note
that will mature on December 31, 20X2.
Kifer Corp. is in financial trouble and has not been able to paid the interest for the year 20X0.
On December 31, 20X1, First Trust agrees to extend the maturity date to December 31, 20X3,
reduce the principal to $370,000, and reduce the interest rate to 9%, payable annually on
December 31.
Kifer's, market rate of interest is 10% at the time of the restructuring on Dec 31, 20X1.
Required:
Prepare the journal entries on Kifer's books on December 31, 20X1, 20X2, and 20X3.
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