2.99 See Answer

Question: Using the same information as in E14-


Using the same information as in E14-22 and E14-24, answer the following questions related to American Bank (creditor).
In E14-22 and E14-24
On December 31, 2014, the 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, 2014, to January 1, 2018.
3. Reducing the interest rate from 12% to 10%.
Barkley pays interest at the end of each year. On January 1, 2018, Barkley Company pays $2,400,000 in cash to Firstar Bank.
Instructions
(a) Compute the loss American Bank will suffer under this new term modification. Prepare the journal entry to record the loss on American’s books.
(b) Prepare the interest receipt schedule for American Bank after the debt restructuring.
(c) Prepare the interest receipt entry for American Bank on December 31, 2015, 2016, and 2017.
(d) What entry should American Bank make on January 1, 2018?
 


> The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at http://annualreport.marksandspencer.com/_assets/downloads/Marksand-Spencer-Annual-report-and-financial-statements-201

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> Celine Dion Company issued $600,000 of 10%, 20-year bonds on January 1, 2014, at 102. Interest is payable semiannually on July 1 and January 1. Dion Company uses the straight-line method of amortization for bond premium or discount. Instructions Prep

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> Define (a) a contingency and (b) a contingent liability.

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2.99

See Answer