As stipulated, your company is having financial difficulty and has asked the bank to restructure its $3 million noteoutstanding. The present note has 3 years remaining and pays a current interest rate of 10%. The present

market rate for a loan of this nature is 12%. The note was issued at its face value. The bank agrees to accept

land in exchange for relinquishing its claim on this note. The land has a book value of $1,950,000 and a fair

value of $2,400,000.

Your company is in financial trouble and is in the process of reorganization. Your manager wants to know how you will report on restructuring the debt. Use the following information to help with this assignment. ASSETS CURRENT ASSETS Cash and cash equivalents Trade accounts receivable, net of allowances Other receivables Operating supplies, at lower of average cost or market Prepaid expenses $108,340 2,866,260 62,150 58,630 446,050 Total Current Assets 3,541,430 PROPERTY, PLANT AND EQUIPMENT (at cost) Land Buildings and improvements Equipment 1,950,000 2,327,410 5,015,660 Other equipment and leasehold improvements total Accumulated depreciation and amortization Net Property, Plant, and Equipment 1,645,580 10,938,650 -7,644,430 3,294,220 OTHER ASSETS Deposits and other assets TOTAL ASSETS 1,000,080 $7,835,730 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable Accrued liabilities Accrued claims costs Federal and other income taxes Deferred income taxes Current maturities of long-term debt and capital lease obligations Short-term borrowings Total Current Liabilities LONG-TERM LIABILITIES Capital lease obligation Note Outstanding Mortgage Outstanding Other liabilities Total Long-term Liabilities Total Liabilities SHAREHOLDERS' EQUITY (DEFICIT) Common stock, $.01 par value; authorized 500,000 shares; issued 231,000 shares Additional paid-in capital Accumulated other comprehensive loss Retained earnings (deficit) Treasury stock Total Shareholders' Equity (Deficit) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $972,160 2,071,270 793,620 19,710 500 50,610 249,250 4,157,120 54,580 3,000,000 608,030 95,860 3,758,470 7,915,590 2,310 731,090 -113,500 -639,180 -60,580 -79,860 $7,835,730 As stipulated, your company is having financial difficulty and has asked the bank to restructure its $3 million note outstanding. The present note has 3 years remaining and pays a current interest rate of 10%. The present market rate for a loan of this nature is 12%. The note was issued at its face value. The bank agrees to accept land in exchange for relinquishing its claim on this note. The land has a book value of $1,950,000 and a fair value of $2,400,000