(Debtor/Creditor Entries for Continuation of Troubled Debt with New Effective Interest) Crocker Corp. owes D. Yeager Corp. a 10-year, 10% note in the amount of $330,000 plus $33,000 of accrued interest. The note is due today, December 31, 2010. Because Crocker Corp. is in financial trouble,

D. Yeager Corp. agrees to forgive the accrued interest, $30,000 of the principal, and to extend the maturity date to December 31, 2013. Interest at 10% of revised principal will continue to be due on 12/31 each year. Assume the following present value factors for 3 periods.

(a) Compute the new effective interest rate for Crocker Corp. following restructure.

(b) Prepare a schedule of debt reduction and interest expense for the years 2010 through 2013.

(c) Compute the gain or loss for D. Yeager Corp. and prepare a schedule of receivable reduction and interest revenue for the years 2010 through 2013.

(d) Prepare all the necessary journal entries on the books of Crocker Corp. for the years 2010, 2011, and 2012.

(e) Prepare all the necessary journal entries on the books of D. Yeager Corp. for the years 2010, 2011, and2012.

Transcribed Image Text:

Single sum Ordinary annuity of 1 21% 93543 2.86989 2%% .93201 2.86295 2½% .92859 2.85602 25% .92521 2.84913 2%% .92184 2.84226 3% 91514 2.82861