Show your work Please! ABC company loaned Z Company $350,00 on January 1, 2012 T

Question

Show your work Please!

ABC company loaned Z Company $350,00 on January 1, 2012 The note had interest rate of 6%, which equaled the prevailing rate of interest in the market on that date, and the principal was due on January 1, 2018. Interest was to be paid annually each December 31. On January 1, 2015, the day after Z company failed to make its 2014 interest payment (this was the first interest payment missed by Z), ABC determined that Z company was experiencing financial trouble and it was deemed probable that the note and interest, in its current form, would not be collected. Because of the change in Z's financial situation, ABC agreed to modify the terms of the loan by forgiving the prior interest not paid accepting a reduced principal amount of $200,000, and accepting reduced interest payments for the remainder of the loan in the amount of $10,000 each year. On January 1, 2015, the present value of the expected cash flows ABC will receive form Z is $194,654. Determine the loss to be recognized by ABC on 1/1/15. $0 $120,000 $150,000 $155,346 $161,000 $176,346 None of the above Determine the amount of interest revenue to be recognized by ABC in 2016 $0 $1,679 $10,000 $11,000 $11,679 $11,780 $12,380 $21,000 None of the above

Explanation / Answer

24) ABC Ltd has foregone interest amount of $ 21,000 ($ 350,000*6%) + Principal amount of $ 150,000 ($ 350,000-$ 200,000) = $ 171,000

G. None of the above.

25) C. Amount of interest revenue recognised for 2016 is $ 10,000

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