Vargo Corp. owes $270,000 to First Trust. The debt is a 10-year, 12% note due December 31,
Question:
Vargo Corp. owes $270,000 to First Trust. The debt is a 10-year, 12% note due December 31, 2025. Because Vargo Corp. is in financial trouble, First Trust agrees to extend the maturity date to December 31, 2027, reduce the principal to $220,000, and reduce the interest rate to 5%, payable annually on December 31.
Instructions
a. Prepare the journal entries on Vargo’s books on December 31, 2025, 2026, 2027.
b. Prepare the journal entries on First Trust’s books on December 31, 2025, 2026, 2027.
Step by Step Answer:
Because the carrying amount of the debt 270000 exceeds the total future cash ...View the full answer
Intermediate Accounting
ISBN: 9781119790976
18th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Related Video
A journal entry is an act of keeping or making records of any transactions either economic or non-economic. Transactions are listed in an accounting journal that shows a company\'s debit and credit balances. The journal entry can consist of several recordings, each of which is either a debit or a credit
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