Ebco has an unpaid bank loan for $40,000 on January 1, 2010. The original intere
ID: 2449281 • Letter: E
Question
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.
Record all the entries concerning the land transfer and the restructuring on the books of Ebco on Jan. 1, 2010
Record the entry made by Ebco for the first payment on Dec. 31, 2010.
Record the entry by the bank to record the troubled debt restructuring.
Explanation / Answer
Ans- Entries in the book of Ebco
1/01/2010
Loan a/c Dr $10000
Loss on transfer a/c Dr $2000
To land a/c $12000
(being land transfer partillay settlemnet of loan )
31/12/2010
Installment on loan a/c Dr $9100
To bank a/c $9100
(being first installment paid on balance loan)
In the books of bank
Land a/c Dr. $10000
To loan a/c $10000
(being bank receive land by partially settlement of loan )
31st dec 2010
Bank a/c Dr.$9100
To installment on loan $9100
(being 1st installment received)
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