Mazza Corp. owes Tsang Corp. a $110,000, 10-year, 10% note plus $11,000 of accrued interest. The note

Question:

Mazza Corp. owes Tsang Corp. a $110,000, 10-year, 10% note plus $11,000 of accrued interest. The note is due today, December 31, 2011. Because Mazza Corp. is in financial trouble, Tsang Corp. agrees to forgive the accrued interest and $10,000 of the principal, and to extend the date to December 31, 2014. Interest at 10% of the revised principal will continue to be due on December 31 of each year.
Instructions
(a) Calculate the new effective interest rate for Mazza Corp. after the restructuring.
(b) Prepare a schedule of the debt reduction and interest expense for the years 2011 through 2014.
(c) Calculate the gain or loss for Tsang Corp. and prepare a schedule of the receivable reduction and interest revenue for the years 2011 through 2014.
(d) Prepare all the necessary journal entries on the books of Mazza Corp. for the years 2011, 2012, and 2013.
(e) Prepare all the necessary journal entries on the books of Tsang Corp. for the years 2011, 2012, and 2013. Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...