Assume the same situation described in Exercise 10 4 except that the terms of modification of the debt are 1 Accrued interest of $95,000 is to be canceled 2 The face value of the note is reduced to $600,000, payable at the end of three years Interest on the new face value at 8 is to be paid annuall...

Part A A gain on restructuring should be recognized because the carrying value of the debt ...

Assume the same situation described in Exercise 10-4 except that the terms of modification of the debt

Question:

Assume the same situation described in Exercise 10-4 except that the terms of modification of the debt are
1. Accrued interest of $95,000 is to be canceled.
2. The of the note is reduced to $600,000, payable at the end of three years.
Interest on the new at 8% is to be paid annually.

Required:
A. Should a gain on restructuring be recognized? Explain.
B. Prepare entries on the books of Spain Company to record the restructuring.
C. Prepare the entry on Spain Company’s books to record the interest payment at the end of the first year after restructuring.

Face Value
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...