Troubled Debt Restructuring Wolfconn Company is having financial difficulties. It has a note payable with a principal amount of $5,000,000, due in three years, plus accrued interest of $750,000 that has not been paid. Wolfconn and the holder of the note negotiate a restructuring of the note, with the following terms: • Principal amount is $2,500,000, payable in five years. • Interest on the note is payable at the end of each of the five years, at a rate of 8 percent per annum. Required a. Prepare the entry to record the restructuring of the debt. Description Debit Answer Answer Credit Answer Answer b. Suppose the new note had a principal amount of $4,500,000, payable in five years, with interest at 8 percent payable at the end of each of the five years. How would this restructuring be recorded? Answer

Troubled Debt Restructuring Wolfconn Company is having financial difficulties. It has a note payable with a principal amount of $5,000,000, due in three years, plus accrued interest of $750,000 that has not been paid. Wolfconn and the holder of the note negotiate a restructuring of the note, with the following terms: • Principal amount is $2,500,000, payable in five years. • Interest on the note is payable at the end of each of the five years, at a rate of 8 percent per annum. Required a. Prepare the entry to record the restructuring of the debt. Description Debit Answer Answer Credit Answer Answer b. Suppose the new note had a principal amount of $4,500,000, payable in five years, with interest at 8 percent payable at the end of each of the five years. How would this restructuring be recorded? Answer

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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Question

Troubled Debt Restructuring
Wolfconn Company is having financial difficulties. It
has a note payable with a principal amount of
$5,000,000, due in three years, plus accrued
interest of $750,000 that has not been paid.
Wolfconn and the holder of the note negotiate a
restructuring of the note, with the following terms:
• Principal amount is $2,500,000, payable in five
years.
• Interest on the note is payable at the end of each
of the five years, at a rate of 8 percent per annum.
Required
a. Prepare the entry to record the restructuring of
the debt.
Description
Debit
Answer
Answer
Credit
Answer
Answer
b. Suppose the new note had a principal amount of
$4,500,000, payable in five years, with interest at 8
percent payable at the end of each of the five years.
How would this restructuring be recorded?
Answer

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