Halvor has asked to restructure its 5 million dollar note outstanding.It has 3 y
ID: 2369868 • Letter: H
Question
Halvor has asked to restructure its 5 million dollar note outstanding.It has 3 years remaining and pays 10 % interest. Present Market rate is 12%.It was issued at face value
A) Bank accepts common stock valued at 3,700,000 in exchange.Common Stock has par value of 1,700,000
B) Bank accepts land in exchange.Land has book value of 3,250,000 and fair value 4,000,000
C) Bank says you do not have to pay interest over 3 year period
D) Bank reduces principal to 4,166,667 and require interest in 2nd and 3rd yr at 10%
Journal entries for both sides on all four
Explanation / Answer
A) Bank accepts common stock valued at 3,700,000 in exchange.Common Stock has par value of 1,700,000
Dr Organization Cost 3,700,000
Cr Common Stock 1,700,000
Cr Additional Paid In Capital 2,000,000
B) Bank accepts land in exchange.Land has book value of 3,250,000 and fair value 4,000,000
Dr Note Payable 4,000,000
Cr Fixed Assets - Land 3,250,000
Cr Gain on fixed asset - Land 750,000
C) Bank says you do not have to pay interest over 3 year period
Dr Interest Expenses - Note Payable
Cr Discount on Note Payable
D) Bank reduces principal to 4,166,667 and require interest in 2nd and 3rd yr at 10%
Dr Note Payable 833,333
Cr DIscount on Note Payable 833,333
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.