Troubled debt d Company d has an unpaid note for $50,000 on January 1,2011. The
ID: 2446994 • Letter: T
Question
Troubled debt d Company d has an unpaid note for $50,000 on January 1,2011. The note was written at 12% annual interest. There is also accrued of $6,000 company c transfer a piece of land to the bank in partial satisfaction of the note. The land has a cost of $16,000 and market value $18,000 The bank reduce the loan by the value of the land and agrees to forgive the accrued interest and to reduce the loan balance to $23,000 the bank the requires four annual future payments of $7,572.39 due each December 31, starting on December 31,2011 For the debtor make entries on the date of restructure (January 1,2011) prepare an amortization table and make the entry on December 31, 2011 For the bank make entries on the date of restructure prepare an amortization table and make the entry on December 31, 2011
Explanation / Answer
UNPAID NOTE=$50,000
ANNUAL INTEREST=12%=$50,000*12%=$6,000
ACCRUED =$6,000
COST OF LAND=$16,000
MARKET VALUE OF LAND=$18,000
JOURNAL ENTRIES FOR DEBTOR ON DATE OF RESTRUCTURE
JOURNAL ENTRIES FOR DEBTOR ON DEC 31,2011
AMORTISATION TABLE
AMORTISATION RATE=$23,000/4=$5,750
JOURNAL ENTRIES ON DATE OF RESTRUCTURE FOR BANK
JOURNAL ENTRIES FOR BANK ON DEC 31,2011
DATE PARTICULARS DEBIT($) CREDIT($) JAN 1,2011 UNPAID NOTE A/C DR 27,000 ACCRUED INTEREST ACCOUNT DR 6,000 TO LAND A/C 16,000 TO PROFIT ON LOAN RESTRUCTUREA/C 17,000 (BEING LOAN RESTRUCTURED)Related Questions
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