What is the present value of the new liability? What is the gain on modification of debt for 2021? What is the interest expense for 2021?
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Due to adverse economic circumstances and poor management, Tagaytay Highlands Company had negotiated a restructuring of the 9% P6,000,000 note payable to Second Bank due on January 1, 2021. There is no accrued interest on the note. The bank has reduced the principal obligation from P6,000,000 to P5,000,000 and extend the maturity to 3 years on December 31, 2023. However, the new interest rate is 13% payable annually every December 31. The present value of 1 at 9% for three periods is .77 and the present value of an ordinary annuity of 1 at 9% for three periods is 2.53.
- What is the present value of the new liability?
- What is the gain on modification of debt for 2021?
- What is the interest expense for 2021?
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- Rothschild Chair Company, Incorporated, was indebted to First Lincoln Bank under a $20 million, 10% unsecured note. The note was signed January 1, 2014, and was due December 31, 2027. Annual interest was last paid on December 31, 2022. At January 1, 2024, Rothschild Chair Company was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. Note: Use appropriate factor(s) from the tables provided. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) 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 Lincoln Bank agreed to settle the debt in exchange for land having a fair value of $16 million but carried on Rothschild Chair Company's books at $13 million. 2. First Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b)…On December 31, 2019, Guimary Corporation is experiencing extreme financial pressure and is in default in meeting interest payment on its long-term note of P6,000,000 due on December 31, 2019. The interest rate is 10% payable every December 31. In an agreement with the creditor, Guimary Corporation obtained the following changes in the terms of the note: The accrued interest of P600,000 on December 31, 2019 is forgiven. The principal is reduced by P1,000,000. The new interest rate is 12%. The new date of maturity is December 31, 2024. At the time of restructuring, the market rate of interest was 10%. What is Guimary Corporation's gain on debt restructuring? P1,979,180 P1,600,000 P1,221,020 a. b. c. d. POLowlife Company defaulted on a $200,000 loan that was due on December 31, 2024. The bank has agreed to allow Lowlife to repay the $200,000 by making a series of equal annual payments beginning on December 31, 2025. Required: 1. Calculate the required annual payment of the bank's Interest rate is 10% and four payments are to be made. 2. Calculate the required annual payment of the bank's Interest rate is 8% and five payments are to be made. 3. If the bank's Interest rate is 10%, how many annual payments of $28,156 would be required to repay the debt? 4. If three payments of $72,070 are to be made, what interest rate is the bank charging Lowlife? Note: For all requirements, Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. FVA of $1. PVA of $1, FVAD of $1 and PVAD of $1) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Calculate the required annual payment if the bank's interest rate is 10% and four payments…
- Blue Cells Can contain On December 31, 2017, Short Co. is in financial difficulty and cannot pay a note due that day. It is a $2,000,000 face value note with $200,000 accrued interest payable to Bryan, Inc. The original market rate of interest on the note was 12.58613%. Bryan agrees to forgive the accrued interest, extend the maturity date (two years) to December 31, 2019, and reduce the interest rate to 4%. The present value of the restructured cash flows is $1,712,000 (using the original market rate). Do NOT add rows to the spreadsheet! Discount Cash Premium Interest payable Par Interest expense Discount on bond payable Yes Bonds payable No Loss on redemption Gain on redemptin Cash Interest payable Interest receivable Notes payable Gain on restructuring Loss on restructuring Discount on Note payable Premium on Note payable…At January 1, 2021, Clayton Hoists Inc. owed Third BancCorp $12 million, under a 10% note due December 31, 2022. Interest was paid last on December 31, 2019. Clayton was experiencing severe financial difficulties and asked Third BancCorp to modify the terms of the debt agreement. After negotiation Third BancCorp agreed to do the following:∙ Forgive the interest accrued for the year just ended.∙ Reduce the remaining two years’ interest payments to $1 million each.∙ Reduce the principal amount to $11 million.Required:Prepare the journal entries by Third BancCorp necessitated by the restructuring of the debt at1. January 1, 2021.2. December 31, 2021.3. December 31, 2022.On December 31, 2023, Green Bank enters into a debt restructuring agreement with Teal Mountain Inc., which is now experiencing financial trouble. The bank agrees to restructure a $2.1-million, 10% note receivable issued at par by the following modifications: 1. Reducing the principal obligation from $2.1 million to $2.00 million Extending the maturity date from December 31, 2023, to December 31, 2026 3. Reducing the interest rate from 10% to 8% 2. Teal Mountain pays interest at the end of each year. On January 1, 2027, Teal Mountain pays $2.00 million in cash to Green Bank. Teal Mountain prepares financial statements in accordance with IFRS 9. (b) Prepare an entry at December 31, 2023, based on the results of your calculation. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry…
- At January 1, 2018, Brainard Industries, Inc., owed Second BancCorp $12 million under a 10% note due December 31, 2020. Interest was paid last on December 31, 2016. Brainard was experiencing severe financial difficultiesand asked Second BancCorp to modify the terms of the debt agreement. After negotiation Second BancCorpagreed to:a. Forgive the interest accrued for the year just ended.b. Reduce the remaining two years’ interest payments to $1 million each and delay the first payment untilDecember 31, 2019.c. Reduce the unpaid principal amount to $11 million.Required:Prepare the journal entries by Brainard Industries, Inc., necessitated by the restructuring of the debt at (1) January1, 2018; (2) December 31, 2019; and (3) December 31, 2020.At January 1, 2024, Mahmoud Industries, Incorporated, owed Second BancCorp $12 million under a 10% note due December 31, 2026. Interest was paid last on December 31, 2022. Mahmoud was experiencing severe financial difficulties and asked Second BancCorp to modify the terms of the debt agreement. After negotiation Second BancCorp agreed to: Forgive the interest accrued for the year just ended. Reduce the remaining two years’ interest payments to $1 million each and delay the first payment until December 31, 2025. Reduce the unpaid principal amount to $11 million. Required: Prepare the journal entries by Mahmoud Industries, Incorporated, necessitated by the restructuring of the debt at (1) January 1, 2024; (2) December 31, 2025; and (3) December 31, 2026.On December 31, 2025, American Bank enters into a debt restructuring agreement with Teal Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $3,300,000 note receivable by the following modifications: Reducing the principal obligation from $3,300,000 to $2,220,000. Extending the maturity date from December 31, 2025, to January 1, 2029. Reducing the interest rate from 12% to 10%. Teal pays interest at the end of each year. On January 1, 2029, Teal Company pays $2,220,000 in cash to American Bank. (a) Can Teal Company record a gain under this term modification? If yes, compute the gain for Teal Company. If no, enter amount as 0. The gain for Teal Company $
- Due to extreme financial difficulties, Armand Company had negotiated a restructuring of a 10% P 5,000,000 note payable due on Dec. 31, 2020. There is no accrued interest on the note. The creditor agreed to reduce the face amount to P 4,000,000, forgive the unpaid interest, reduce the interest rate to 8% and extend the due date three years from Dec. 31, 2020. The present value of 1 at 10% for 3-periods is 0.75 and the present value of an ordinary annuity of 1 at 10% for 3-periods is 2.49. What is the gain on extinguishment for 2020? *a. P 1,703,200b. P 1,203,200c. P 2,000,000d. P 540,000On 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 $1.0-million, 10% note receivable issued at par by the following modifications: 1. Reducing the principal obligation from $1.0 million to $0.80 million Extending the maturity date from December 31, 2023, to December 31, 2026 Reducing the interest rate from 10% to 9% 2. 3. Troubled pays interest at the end of each year. On January 1, 2027, Troubled Inc. pays $0.80 million in cash to Crane Bank for the principal. The market rate is currently 9%. 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 List of Accounts 10 % Using (1) factor tables, (2) a financial calculator, or…At January 1, 2021, Brainard Industries, Inc., owed Second BancCorp $26 million under a 10% note due December 31, 2023. Interest was paid last on December 31, 2019. Brainard was experiencing severe financial difficulties and asked Second BancCorp to modify the terms of the debt agreement. After negotiation Second BancCorp agreed to: Forgive the interest accrued for the year just ended. Reduce the remaining two years’ interest payments to $2 million each and delay the first payment until December 31, 2022. Reduce the unpaid principal amount to $24 million. Required:Prepare the journal entries by Brainard Industries, Inc., necessitated by the restructuring of the debt at (1) January 1, 2021; (2) December 31, 2022; and (3) December 31, 2023 (4) Record the payment of the debt at maturity.
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