INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
9th Edition
ISBN: 9781260216141
Author: SPICELAND
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 14, Problem 14.35E
Troubled debt restructuring; modification of terms; unknown effective rate
• Appendix B
At January 1, 2018, NCI Industries, Inc., was indebted to First Federal Bank under a $240,000, 10% unsecured note. The note was signed January 1, 2014, and was due December 31, 2019. Annual interest was last paid on December 31, 2016. NCI was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. First Federal agreed to reduce last year’s interest and the remaining two years’ interest payments to $11,555 each and delay all payments until December 31, 2019, the maturity date.
Required:
Prepare the
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
not use ai please
not a graded assignement
Can Larkin Company record a gain under the term modification mentioned above?
Chapter 14 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
Ch. 14 - How is periodic interest determined for...Ch. 14 - As a general rule, how should long-term...Ch. 14 - How are bonds and notes the same? How do they...Ch. 14 - What information is contained in a bond indenture?...Ch. 14 - On January 1, 2018, Brandon Electronics issued 85...Ch. 14 - How is the price determined for a bond (or bond...Ch. 14 - A zero-coupon bond pays no interest. Explain.Ch. 14 - Prob. 14.8QCh. 14 - Compare the two commonly used methods of...Ch. 14 - Prob. 14.10Q
Ch. 14 - When a notes stated rate of interest is...Ch. 14 - How does an installment note differ from a note...Ch. 14 - Prob. 14.13QCh. 14 - Prob. 14.14QCh. 14 - Air Supply issued 6 million of 9%, 10-year...Ch. 14 - Both convertible bonds and bonds issued with...Ch. 14 - Prob. 14.17QCh. 14 - Cordova Tools has bonds outstanding during a year...Ch. 14 - If a company prepares its financial statements...Ch. 14 - (Based on Appendix 14A) Why will bonds always sell...Ch. 14 - Prob. 14.21QCh. 14 - Prob. 14.22QCh. 14 - Prob. 14.23QCh. 14 - Bank loan; accrued interest LO132 On October 1,...Ch. 14 - Non-interest-bearing note; accrued interest LO132...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Straight-line interest on bonds LO142 On January...Ch. 14 - Investment in bonds LO142 On January 1, a company...Ch. 14 - Note issued for cash; borrower and lender LO143...Ch. 14 - Note with unrealistic interest rate LO143 On...Ch. 14 - Installment note LO143 On January 1, a company...Ch. 14 - Prob. 14.12BECh. 14 - Bonds with detachable warrants LO145 Hoffman...Ch. 14 - Convertible bonds LO145 Hoffman Corporation...Ch. 14 - Reporting bonds at fair value LO146 AI Tool and...Ch. 14 - Bond valuation LO142 Your investment department...Ch. 14 - Determine the price of bonds in various situations...Ch. 14 - Determine the price of bonds; issuance; effective...Ch. 14 - Investor; effective interest LO142 (Note: This is...Ch. 14 - Bonds; issuance; effective interest; financial...Ch. 14 - Bonds; issuance; effective interest LO142 The...Ch. 14 - Prob. 14.7ECh. 14 - Investor; straight-line method LO142 (Note: This...Ch. 14 - Issuance of bonds; effective interest;...Ch. 14 - Issuance of bonds; effective interest;...Ch. 14 - Bonds; effective interest; adjusting entry LO142...Ch. 14 - Prob. 14.12ECh. 14 - Issuance of bonds; effective interest LO142...Ch. 14 - Prob. 14.14ECh. 14 - Error correction; accrued interest on bonds LO142...Ch. 14 - Error in amortization schedule LO143 Wilkins Food...Ch. 14 - Prob. 14.17ECh. 14 - Note with unrealistic interest rate; lender;...Ch. 14 - Prob. 14.19ECh. 14 - Prob. 14.20ECh. 14 - Installment note LO143 LCD Industries purchased a...Ch. 14 - Prob. 14.22ECh. 14 - Early extinguishment LO145 The balance sheet of...Ch. 14 - Convertible bonds LO145 On January 1, 2018, Gless...Ch. 14 - Prob. 14.25ECh. 14 - Convertible bonds; induced conversion LO145 On...Ch. 14 - Prob. 14.27ECh. 14 - Bonds with detachable warrants LO145 On August 1,...Ch. 14 - Reporting bonds at fair value LO146 (Note: This...Ch. 14 - Reporting bonds at fair value LO146 On January 1,...Ch. 14 - Reporting bonds at fair value; calculate fair...Ch. 14 - Prob. 14.32ECh. 14 - Troubled debt restructuring; debt settled ...Ch. 14 - Prob. 14.34ECh. 14 - Troubled debt restructuring; modification of...Ch. 14 - Prob. 14.36ECh. 14 - Determining the price of bonds; discount and...Ch. 14 - Effective interest; financial statement effects ...Ch. 14 - Prob. 14.3PCh. 14 - Bond amortization schedule LO142 On January 1,...Ch. 14 - Issuer and investor; effective interest;...Ch. 14 - Prob. 14.6PCh. 14 - Prob. 14.7PCh. 14 - Bonds; effective interest; partial period...Ch. 14 - Zero-co upon bonds LO142 On January 1, 2018,...Ch. 14 - Prob. 14.10PCh. 14 - Prob. 14.11PCh. 14 - Prob. 14.12PCh. 14 - Note and installment note with unrealistic...Ch. 14 - Prob. 14.14PCh. 14 - Early extinguishment; effective interest LO145...Ch. 14 - Prob. 14.16PCh. 14 - Prob. 14.17PCh. 14 - Early extinguishment LO145 The long-term...Ch. 14 - Convertible bonds; induced conversion; bonds with...Ch. 14 - Convertible bonds; zero coupon; potentially...Ch. 14 - Prob. 14.21PCh. 14 - Determine bond price; record interest; report...Ch. 14 - Report bonds at fair value; quarterly reporting ...Ch. 14 - Prob. 14.24PCh. 14 - Prob. 14.25PCh. 14 - Troubled debt restructuring Appendix B At January...Ch. 14 - Prob. 14.1BYPCh. 14 - Real World Case 142 Zero-coupon debt; HP Inc. ...Ch. 14 - Prob. 14.4BYPCh. 14 - Prob. 14.5BYPCh. 14 - Prob. 14.6BYPCh. 14 - Prob. 14.8BYPCh. 14 - Prob. 14.9BYPCh. 14 - Research Case 1410 FASB codification research;...Ch. 14 - Prob. 14.11BYP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Restructuring (Debtor) Oakwood Corporation is delinquent on a 2,400,000, 10% note to Second National Bank that was due January 1, 2019. At that time, Oakwood owed the principal amount plus 34,031.82 of accrued interest. Oakwood enters into a debt restructuring agreement with the bank on January 2, 2019. Required: Prepare the journal entries for Oakwood to record the debt restructuring agreement and all subsequent interest payments assuming the following independent alternatives: 1. The bank extends the repayment date to December 31, 2022, forgives the accrued interest owed, reduces the principal by 200,000, and reduces the interest rate to 8%. 2. The bank extends the repayment date to December 31, 2022, forgives the accrued interest owed, reduces the principal by 200,000, and reduces the interest rate to 1%. 3. The bank accepts 160,000 shares of Oakwoods 55 par value common stock, which is currently selling for 14.50 per share, in full settlement of the debt. 4. The bank accepts land with a fair value of 2,300,000 in full settlement of the debt. The land is being carried on Oakwoods books at a cost of 2,200,000.arrow_forwardAt January 1, 2024, NCI Industries, Incorporated was indebted to First Federal Bank under a $246,000, 10% unsecured note. . The note was signed January 1, 2017, and was due December 31, 2025. Annual interest was last paid on December 31, 2022. • NCI was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. • First Federal agreed to reduce last year's interest and the remaining two years' interest payments to $11,844 each and delay all payments until December 31, 2025, the maturity date. Required: Prepare the journal entries by NCI Industries, Incorporated, necessitated by the restructuring of the debt at (1) January 1, 2024; (2) December 31, 2024; and (3) December 31, 2025. Note: Do not round intermediate calculations. Round final answers to the nearest whole dollar. If no entry is required for a transaction/event, select "No journal entry required in the first account field. Use tables, Excel, or a financial calculator. (FV of…arrow_forwardMunabhaiarrow_forward
- Vinubhaiarrow_forwardPlease help mearrow_forwardOn 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…arrow_forward
- On December 31, 2023, Green Bank enters into a debt restructuring agreement with Windsor Inc., which is now experiencing financial trouble. The bank agrees to restructure a $2.9-million, 10% note receivable issued at par by the following modifications: 1. Reducing the principal obligation from $2.9 million to $2.76 million 2. Extending the maturity date from December 31, 2023, to December 31, 2026 3. Reducing the interest rate from 10% to 8% Windsor pays interest at the end of each year. On January 1, 2027, Windsor pays $2.76 million in cash to Green Bank. Windsor prepares financial statements in accordance with IFRS 9. Prepare the interest payment entry for Windsor on December 31, 2025, and the entry on January 1, 2027. (Round answer to O 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 all debit entries…arrow_forwardImpairment of zero-interest notes receivable, GAAP vs. IFRS On December 31, 2020, Firth Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-interest note. The note was issued to yield 10% interest. Unfortunately, during 2022, Firth began to experience financial difficulty. As a result, at December 31, 2022, Paris Bank determined that it was probable that it would collect only $75,000 at maturity. The market rate of interest on loans of this nature is now 11%. 1,Instructions: On March 31, 2023, Paris learns that Firth will be able to repay the loan under the original terms. Paris Bank uses IFRS. Prepare the journal entry to be recorded on March 31, 2023, if any. Answer within 45mins.it would be really helpful!arrow_forward(Term Modification without Gain—Debtor’s Entries) On December 31, 2017, American Bank enters into a debt restructuring agreement with Barkley Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $3,000,000 note receivable by the following modifications:1. Reducing the principal obligation from $3,000,000 to $2,400,000.2. Extending the maturity date from December 31, 2017, to January 1, 2021.3. Reducing the interest rate from 12% to 10%.Barkley pays interest at the end of each year. On January 1, 2021, Barkley Company pays $2,400,000 in cash to American Bank.Instructions(a) Will the gain recorded by Barkley be equal to the loss recorded by American Bank under the debt restructuring?(b) Can Barkley Company record a gain under the term modification mentioned above? Explain.(c) Assuming that the interest rate Barkley should use to compute interest expense in future periods is 1.4276%, prepare the interest payment schedule of the note…arrow_forward
- On 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…arrow_forwardOn 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 $arrow_forwardAt January 1, 2018, NCI Industries, Inc., was indebted to First Federal Bank under a $240,000, 10% unsecurednote. The note was signed January 1, 2014, and was due December 31, 2019. Annual interest was last paid onDecember 31, 2016. NCI was experiencing severe financial difficulties and negotiated a restructuring of the termsof the debt agreement. First Federal agreed to reduce last year’s interest and the remaining two years’ interestpayments to $11,555 each and delay all payments until December 31, 2019, the maturity date.Required:Prepare the journal entries by NCI Industries, Inc., necessitated by the restructuring of the debt at: (1) January 1,2018; (2) December 31, 2018; and (3) December 31, 2019.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
How Bankruptcy Works; Author: Two Cents;https://www.youtube.com/watch?v=tpI0XWjIsqI;License: Standard Youtube License