On December 31, 2019, Introuble Inc. is in financial difficulty and cannot pay a 10%, $...

 

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On December 31, 2019, Introuble Inc. is in financial difficulty and cannot pay a 10%, $ 1,000,000, par value note, due immediately, to LoanShark Corporation (LC). (So obviously, the loan's ‘market rate' was 10%.) LC agrees to extend the maturity date to December 31, 2023, and reduce the interest payment rate to 8% on the new principal amount, and the new principal amount due is $940,000. Both companies have a year end of Dec. 31. Required: Refer to chart below for clues... a) Prepare the journal entries for both debtor and creditor to account for the event on December 31, 2019. Be sure to show calculations. (Use IFRS) b) Based on your amounts in (a) above, prepare the journal entry to record the first cash payment on December 31, 2020 for Introuble Inc. If no entry is required, state this fact, and explain why no entry is required. c) Assume the same information, except that the principal amount due changes to $980,000, and the interest rate changes to 8% of the new principal. Prepare the journal entry for Introuble only on December 31, 2019. Use ASPE. (7.3921% is a relevant % in this problem.) If no entry is required, state that no entry is required. d) Prepare the journal entry for the first payment on December 31, 2020 based on the information in (c). (Use ASPE.) If no entry is required, state this fact, and explain why no entry is required. On December 31, 2019, Introuble Inc. is in financial difficulty and cannot pay a 10%, $ 1,000,000, par value note, due immediately, to LoanShark Corporation (LC). (So obviously, the loan's ‘market rate' was 10%.) LC agrees to extend the maturity date to December 31, 2023, and reduce the interest payment rate to 8% on the new principal amount, and the new principal amount due is $940,000. Both companies have a year end of Dec. 31. Required: Refer to chart below for clues... a) Prepare the journal entries for both debtor and creditor to account for the event on December 31, 2019. Be sure to show calculations. (Use IFRS) b) Based on your amounts in (a) above, prepare the journal entry to record the first cash payment on December 31, 2020 for Introuble Inc. If no entry is required, state this fact, and explain why no entry is required. c) Assume the same information, except that the principal amount due changes to $980,000, and the interest rate changes to 8% of the new principal. Prepare the journal entry for Introuble only on December 31, 2019. Use ASPE. (7.3921% is a relevant % in this problem.) If no entry is required, state that no entry is required. d) Prepare the journal entry for the first payment on December 31, 2020 based on the information in (c). (Use ASPE.) If no entry is required, state this fact, and explain why no entry is required.