(A) Consider the following independent situations. I. GG Co. owessh.333, 000 to MM co. The debt is...
Question:
(A) Consider the following independent situations.
I. GG Co. owessh.333, 000 to MM co. The debt is a 10-year, 11% note. Because Gregory Co. is in financial trouble, MM co. agrees to accept some property and cancel the entire debt. The property has a book value ofsh.150,000 and a fair value ofsh.230, 000. Prepare the journal entry on GG’s books for debt settlement.
II. KK Co. owessh.450, 000 to FT Bank. The debt is a 10-year, 12% note due December 31, 2020. Because KK Co. is in financial trouble, FT Bank agrees to extend the maturity date to December 31, 2022, reduce the principal tosh.370, 000, and reduce the interest rate of 5%, payable annually on December 31. KK’s, market rate of interest is 8%. Prepare the journal entries on KK’s books on December 31, 2020, 2021, and 2022.
(B)TT Co. sells sh.600, 000 of 12% bonds on June 1, 2019. The bonds pay interest on
December 1 and June 1. The due date of the bonds is June 1, 2024. The bonds yield 10%, selling for sh.638, 780. On October 1, 2020, TT Co buys back sh.300, 000 worth of bonds for sh.315, 000 (includes accrued interest). Give entries through October 1, 2020.
Required
Prepare all of the relevant journal entries from the time of sale until the date indicated. Amortize premium or discount on interest dates and at year-end. (Assume that reversing entries were made.), (Round to the nearest shilling.)
