On December 31, 2019, Sterling Bank enters into a debt restructuring agreement with Barkley plc, which is
Question:
1. Reducing the principal obligation from £3,000,000 to £2,400,000.
2. Extending the maturity date from December 31, 2019, to January 1, 2023.
3. Reducing the interest rate from 12% to 10%. Barkley's market rate of interest is 15%.
Barkley pays interest at the end of each year. On January 1, 2023, Barkley Company pays £2,400,000 in cash to Sterling Bank.
Instructions
a. Can Barkley record a gain under the term modification mentioned above? Explain.
b. Prepare the amortization schedule of the note for Barkley Company after the debt modification.
c. Prepare the interest payment entry for Barkley on December 31, 2021.
d. What entry should Barkley make on January 1, 2023?
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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