Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 9, Problem 9.21BE
To determine
To prepare: The accounting entry to record notes receivable in the case of discount.
Given information:
Notes receivable accepted is for $5,000,000.
Current market interest rate is 5%.
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Larkspur Corporation is having financial difficulty and therefore has asked Cullumber National Bank to restructure its $6.05 million note outstanding. The present note has 3 years remaining and pays a current rate of interest of 10%. The present market rate for a loan of this nature is 12%. The note was issued at its face value.The following are four independent situations. Prepare the journal entry that Larkspur and Cullumber National Bank would make for each of these restructurings. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)
a
Cullumber National Bank agrees to take an equity interest in Larkspur by accepting common stock valued at $3,756,000 in exchange for relinquishing its claim on this note. The common stock has a par value of $1,757,000.
b
Cullumber National Bank agrees to accept land in exchange for relinquishing its claim on this note. The land has a book value of $3,181,000 and a fair…
Larkspur Corporation is having financial difficulty and therefore has asked Cullumber National Bank to restructure its $6.05 million note outstanding. The present note has 3 years remaining and pays a current rate of interest of 10%. The present market rate for a loan of this nature is 12%. The note was issued at its face value.The following are four independent situations. Prepare the journal entry that Larkspur and Cullumber National Bank would make for each of these restructurings. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)
(a)
Cullumber National Bank agrees to take an equity interest in Larkspur by accepting common stock valued at $3,756,000 in exchange for relinquishing its claim on this note. The common stock has a par value of $1,757,000.
(b)
Cullumber National Bank agrees to accept land in exchange for relinquishing its claim on this note. The land has a book value of $3,181,000 and…
Buddy Mountain Corp. currently has an issued debenture outstanding with ING Bank. The note has a principal of $2.5 million, was issued at face value, an interest payable at 7%. The term of the debenture was 10 years and was issued on December 31, 2010. The current market rate of this debenture is 9%. Buddy Mountain Corp. has been experiencing financial difficulties and has asked ING Bank to restructure the note. Both Buddy Mountain and ING Bank prepare financial statements in accordance with IFRS. It is currently December 3, 2017
ING Bank has agreed to accept a building in exchange for relinquishing this debenture. This building has a carrying amount of $900,000 (original cost $3,000,000) and a fair value of $2 million. Assume that the bank had already recognized a loss on impairment
Required:
Prepare journal entries that Buddy Mountain Corp. and ING Bank would make for the restructuring.
Chapter 9 Solutions
Intermediate Accounting (2nd Edition)
Ch. 9 - Prob. 9.1QCh. 9 - Do companies always classify cash as a current...Ch. 9 - Prob. 9.3QCh. 9 - Do accountants typically measure accounts...Ch. 9 - Under the allowance method, will the actual...Ch. 9 - How does an entity record a subsequent recovery of...Ch. 9 - Does the aging of accounts receivable method of...Ch. 9 - What is the difference between pledging accounts...Ch. 9 - How do companies account for receivables that are...Ch. 9 - Is the face value of a note receivable exchanged...
Ch. 9 - What do firms use to record the sales value of a...Ch. 9 - Explain why a company must have highly effective...Ch. 9 - The following are held by YRT Corporation at...Ch. 9 - Fernandez Company had an accounts receivable...Ch. 9 - On its December 31, Year 2, balance sheet, Red...Ch. 9 - Stanberry Company sold 500,000 of net accounts...Ch. 9 - On November 30, Year 1, Derin Corporation agreed...Ch. 9 - Which of the following disclosures about accounts...Ch. 9 - Prob. 9.1BECh. 9 - Prob. 9.2BECh. 9 - Prob. 9.3BECh. 9 - Prob. 9.4BECh. 9 - Prob. 9.5BECh. 9 - Sales Discounts, Most-Likely-Amount Method. On...Ch. 9 - Allowance for Uncollectible Accounts, Write-Off....Ch. 9 - Allowance for Uncollectible Accounts, Write-Off....Ch. 9 - Allowance for Uncollectible Accounts, Recovery....Ch. 9 - Bad Debt Expense, Journal Entry. Paul Anchor...Ch. 9 - Bad Debt Expense. Journal Entry. Paul Anchor,...Ch. 9 - Bad Debt Expense, Aging of Accounts Receivable,...Ch. 9 - Bad Debt Expense, Aging of Accounts Receivable,...Ch. 9 - Prob. 9.14BECh. 9 - Prob. 9.15BECh. 9 - Assigned Receivables. Using the information...Ch. 9 - Factoring Receivables without Recourse. Nicks...Ch. 9 - Prob. 9.18BECh. 9 - Notes Receivable. Welk Associates sold a piece of...Ch. 9 - Prob. 9.20BECh. 9 - Prob. 9.21BECh. 9 - Prob. 9.22BECh. 9 - Internal Controls. Identify whether the following...Ch. 9 - Prob. 9.24BECh. 9 - Prob. 9.25BECh. 9 - Prob. 9.26BECh. 9 - Prob. 9.27BECh. 9 - Prob. 9.28BECh. 9 - Prob. 9.1ECh. 9 - Volume Discounts, Sales Discounts. Sodesta Company...Ch. 9 - Allowance for Uncollectible Accounts, Journal...Ch. 9 - Bad Debt Expense, Aging of Accounts Receivable....Ch. 9 - Bad Debt Expense, Write-Offs, Journal Entry....Ch. 9 - Bad Debt Expense, Aging of Accounts Receivable,...Ch. 9 - Bad Debt Expense, Aging of Accounts Receivable,...Ch. 9 - Bad Debt Expense, Percentage of Accounts...Ch. 9 - Prob. 9.9ECh. 9 - Assigning Receivables, Factoring Receivables....Ch. 9 - Prob. 9.11ECh. 9 - Factoring Receivables with and without Recourse....Ch. 9 - Factoring Receivables without Recourse, Factoring...Ch. 9 - Prob. 9.14ECh. 9 - Prob. 9.15ECh. 9 - Notes Receivable with Year-End Interest Accrual,...Ch. 9 - Prob. 9.18ECh. 9 - Allowance for Uncollectible Accounts, Journal...Ch. 9 - Prob. 9.2PCh. 9 - Allowance for Uncollectible Accounts, Aging of...Ch. 9 - Prob. 9.4PCh. 9 - Bad Debt Expense, Aging of Accounts Receivable....Ch. 9 - Bad Debt Expense, Aging of Accounts Receivable,...Ch. 9 - Prob. 9.7PCh. 9 - Prob. 9.8PCh. 9 - Aging of Accounts Receivable, Write-Offs,...Ch. 9 - Disclosure. Using the transactions listed in P9-9,...Ch. 9 - Accounts Receivable Disclosure. Using Kellogg...Ch. 9 - Prob. 1JCCh. 9 - Financial Statement Analysis Case: Revlon The...Ch. 9 - Prob. 1SSCCh. 9 - Surfing the Standards Case 2: Costs Associated...Ch. 9 - Prob. 1BCC
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