On december 31, 2012, the american bank enters into a debt restructuring agreement with barkley company, which
Question:
On december 31, 2012, the american bank enters into a debt restructuring agreement with barkley company, which is now experiencing financial trouble. The bank agrees to restructure a 13%, issued at par, $3,055,000 note receivable by the following modifications:
1. Reducing the principal obligation from $3,055,000 to $2,444,000.
2. Extending the maturity date from december 31, 2012, to january 1, 2016.
(a) Will the gain recorded by barkley be equal to the loss recorded by american bank under the debt restructuring? Noyes
(b) Can barkley company record a gain under the term modification mentioned above? Noyes
(c) Assuming that the interest rate barkley should use to compute interest expense in future periods is 1.4276%, prepare the interest payment schedule of the note for barkley company after the debt restructuring. (round answers to 0 decimal places, e.g. $38,548.) Barkley company interest payment schedule after debt restructuring effective-interest rate date cash paid interest expense reduction of carrying amount carrying amount of note 12/31/12 $ $ $ $ 12/31/13 12/31/14 12/31/15 * total $ $ $ * difference due to rounding
Expert Answer:
1 No The gain recorded by Barkley is not equal to the loss recorded by American Bank under the debt ... View the full answer
