Question

Return to question 33 At January 1, 2021. Clayton Hoists Inc. owed Third BancCorp $12 million, under a 10% note due December 31, 2022. Interest was paid last on December 31, 2019. Clayton was experiencing severe financial difficulties and asked Third BancCorp to modify the terms of the debt agreement. After negotiation Third BancCorp agreed to do the following: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): 11.2 points • Forgive the interest accrued for the year just ended. • Reduce the remaining two years' interest payments to $1 million each. • Recluce the principal amount to $11 million. Required: 1-3. Prepare the journal entries by Third BancCorp necessitated by the restructuring of the debt at January 1, 2021, December 31, 2021 and December 31, 2022. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required in the first account field. Round your final answers to nearest whole dollar amount.) Answer is not complete. No Date General Journal Credit Debit 2,373,510 | 1 January 01, 2021 Bad debl expense Interest receivable Notes receivable 1.200,000 1,173,510 December 31, 202 Cash Notes receivable Interest revenue 1,000,000 82.649 1.082.649 13 December 31, 204 Cash Noles payable Interest revenue 1,000,000 90,861 ® 1.090.861 December 31, 202 Cash 11,000,000 Accounts ronivable 11,000,000 X

Answer 1

No. Date Credit ($) Journal Account Titles and Explanation 1/1/2021 Bad debt expense Interest receivable (To record the forefitire of interest receivable) Debit ($) 1,200,000 1,200,000 Only interest is forgived. So no need to credit notes receivable. 1,000,000 82,649 12/31/2021 Cash Bad debt expense Interest revenue (To record the net interest received) 1,082,649 1,000,000 90,861 12/31/2022 Cash Bad debt expense Interest revenue (To record the net interest received) 1,090,861 11,000,000 1,000,000 12/31/2022 Cash Bad debt expense Accounts receivable (To record the principal amounrt received) 12,000,000 Activate Windows