Fall 2013_Acc 3100_Ch 14

Forgive the interest accrued from last year of

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Unformatted text preview: odify the terms of the agreement as follows: agrees to modify the terms of the agreement as follows: 1.Forgive the interest accrued from last year of $3,000,000. 1.Forgive the interest accrued from last year of $3,000,000. 2.Reduce the remaining two interest payments to $2,000,000 each. 2.Reduce the remaining two interest payments to $2,000,000 each. 3.Reduce the principal amount to $25,000,000. 3.Reduce the principal amount to $25,000,000. Carrying amount Future payments Gain to developer Principal $ 30,000,000 25,000,000 Interest $ 3,000,000 4,000,000 Total $ 33,000,000 29,000,000 $ 4,000,000 14-38 Debt is Continued, but with Modified Terms At the date of the new agreement, the following journal entry is required: Accrued interest payable ............................. Note payable …........................................... Gain on debt restructuring ………. 3,000,000 1,000,000 4,000,000 The debit to notes payable is for the difference between the old face amount of $30,000,000 and the total future cash payments of $29,000,000 At each of the next two interest payments, we will make the following entry: Note payable …......................................... Cash ……………………………… 2,000,000 2,000,000 14-39 Debt is Continued, but with Modified Terms Face amount of old note Entry at date of restructuring First interest payment S econd interest payment Maturity value of note Amount $ 30,000,000 (1,000,000) (2,000,000) (2,000,000) $ 25,000,000 At maturity, the developer will make the following entry: Note payable …......................................... Cash ……………………………… 25,000,000 25,000,000...
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This note was uploaded on 11/19/2013 for the course ACCOUNTING 3100 taught by Professor He during the Fall '10 term at CUNY Baruch.

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