B. Troubled Debt Restructuring Ebco has an unpaid bank loan for $40,000 on Janua
ID: 2448825 • Letter: B
Question
B. Troubled Debt Restructuring Ebco has an unpaid bank loan for $40,000 on January 1, 2010. The original interest rate was 7% annual. There is also $4,000 of unpaid, accrued interest. The bank agrees to have Ebco transfer a piece of land with an agreed market value of $10,000 in partial satisfaction of the loan. Ebco paid $12,000 for the land last year. The bank then agrees to 4 annual payments of $9,100 due each Dec. 31, starting Dec. 31, 2010. 1. Record all the entries concerning the land transfer and the restructuring on the books of Ebco on Jan. 1, 2010 2. Record the entry made by Ebco for the first payment on Dec. 31, 2010. 3. Record the entry by the bank to record the troubled debt restructuring.
Explanation / Answer
1) 1. Record all the entries concerning the land transfer and the restructuring on the books of Ebco on Jan. 1, 2010
2)2. Record the entry made by Ebco for the first payment on Dec. 31, 2010
3)3. Record the entry by the bank to record the troubled debt restructuring.
PV of 9100 , i =7% t = 4
= $30,823
bad debts = $34,000 - $30,823 = $3177
Notes payable $10,000 Loss on transfer of land 2,000 To land $12,000 Accrued interest payable $4,000 To Notes payable $4,000 Loss on restructuring $2,400 To Notes payable $2,400 (34000 - 36,400(9100*4)Related Questions
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