On 1/1/2010, XYZ Co. borrowed money from a local bank by signing a 4 year, 6%, $

Question

On 1/1/2010, XYZ Co. borrowed money from a local bank by signing a 4 year, 6%, $100K note. The interest is payable at the end of each year. The note (loan) is a private one so that it has no market for trading. After paying the THIRD year's interest, XYZ ran into a financial difficulty and could not make the necessary payments for the note on 12/31/2013 (the maturity date). On this maturity date, the bank agrreed to forgive the note plus the accrued interest for 2013 and agreed to accept 1600 shares of XYZs common stock, which har a parr value of $50 per share and was selling at $56/share at that time.

Q1) compute XYZ gain (or loss) from restructuring the note at the maturity date
Q2) Prepare the jornal entry for XYZ to record the settlement of the note at maturity.
Q3)suppose that XYZ settled the debt by giving a non cash asset (rather than capital stock shares), which had a book value of $77K and a fair market value of $88k. Prepare the journal entry for the company to record this settlement at the maturity date.
Q4) Refer to Q3, prepare the journal entry for the bank to record the settlement?

Explanation / Answer

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