Consider the following independent situations. Instructions a. Gottlieb Stores owes 199,800 to Ceballos SpA. The debt is
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Instructions
a. Gottlieb Stores owes €199,800 to Ceballos SpA. The debt is a 10-year, 11% note. Because Gottlieb is in financial trouble, Ceballos agrees to accept some land and cancel the entire debt. The land has a book value of €90,000 and a fair value of €140,000. Prepare the journal entry on Gottlieb's books for debt settlement.
b. Vargo Corp. owes $270,000 to First Trust. The debt is a 10-year, 12% note due December 31, 2019. Because Vargo Corp. is in financial trouble, First Trust agrees to extend the maturity date to December 31, 2021, reduce the principal to $220,000, and reduce the interest rate to 5%, payable annually on December 31. Vargo's market rate of interest is 8%. Prepare the journal entries on Vargo's books on December 31, 2019, 2020, and 2021.
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...
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Related Book For
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
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