The Perry National Bank has a note receivable of $200,000 from the Mogren Company that it is
Question:
The Perry National Bank has a note receivable of $200,000 from the Mogren Company that it is carrying at face value and is due on December 31, 2011. Interest on the note is payable at 9% each December 31. The Mogren Company paid the interest due on December 31, 2007, but informed the bank that it would probably miss the next two years’ interest payments because of its financial difficulties. After that, it expected to resume its annual interest payments, but it would make the principal payment one year late, with interest paid for that additional year at the time of the principal payment.
Required
1. Compute the value of the impaired loan on December 31, 2007.
2. Prepare the journal entries from 2007 to 2012 for the bank to record the above events.
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones