Cardinal & Gold Real Estate Company borrowed $100.0 million in an arms-length transaction on January 1, 2014.
Question:
1. Prepare the Company’s analysis and conclude on the appropriate accounting for the adjustments to the terms of the debt arrangement. Your analysis should address both alternatives and conclude as to why one is the most appropriate. Be sure that your analysis links facts of the case to the ASC codification guidance and state any judgments you make in determining the conclusion.
2. As an appendix to your analysis, include for each alternative the journal entries required as of the date of the refinancing as well as journal entries for each year end after the debt modification through and including December 31, 2023 (December 31 year end journal entries only; no need to consider monthly or quarterly entries for this case). Please include a summary description for each journal entry as would be presented to a “non-accountant”.
Intermediate Accounting 2014 FASB Update
ISBN: 978-1118147290
15th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield