Rocky Mountain Corp. currently has an issued debenture outstanding with Abbra Bank. The note has a principal
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Instructions
For each of the following independent situations related to the above scenario, prepare the journal entry that Rocky Mountain Corp. and Abbra Bank would make for the restructuring that is described. Use PV tables to calculate the amounts for the journal entries.
(a) Abbra Bank has agreed to accept common shares with a market value of $1.5 million in exchange for relinquishing this note. Assume that the bank had previously recognized a loss on impairment.
(b) Abbra Bank has agreed to accept a building in exchange for relinquishing this debenture. The building has a carrying amount of $500,000 (original cost was $1,900,000) and a fair value of $1.5 million. Assume that the bank had already recognized a loss on impairment.
(c) Abbra Bank agrees to modify the note by allowing Rocky Mountain to not pay the interest on the note for the remaining period. (Hint: Refer to Appendix 3B for tips on calculating and use the time value of money tables.) Assume that the bank had not previously recognized any loss on impairment.
(d) Abbra Bank agrees to reduce the principal to $1.7 million and require interest only in the third year at 4%, waiving the first two years' worth of interest. (Hint: Refer to Appendix 3B for tips on calculating and use the time value of money tables.) Assume that the bank had not previously recognized any loss on impairment?
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Related Book For
Intermediate Accounting
ISBN: 978-1119048541
11th Canadian edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy
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