Vista Corp. owes $600,000 to First National. The debt is a 10-year, 10% note due December 31,
Question:
Vista Corp. owes $600,000 to First National. The debt is a 10-year, 10% note due December 31, 2014. Because Vista Corp. is in financial trouble, First National agrees to extend the maturity date to December 31, 2017, reduce the principal to $500,000, and reduce the interest rate to 6%, payable annually on December 31.
Instructions
(a) Prepare the journal entries on Vista’s books on December 31, 2014, 2015, 2016, 2017.
(b) Prepare the journal entries on First National’s books on December 31, 2014, 2015, 2016, 2017.
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...
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Step by Step Answer:
Because the carrying amount of the debt 600000 exceeds the total future cash flows 590000 500000 300...View the full answer
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Related Book For 
Intermediate Accounting
ISBN: 978-1118147290
15th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield
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