Exercise 14-23 (Part Level Submission)

On December 31, 2020, Cullumber Bank enters into a debt restructuring agreement with Barkley Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $3,900,000 note receivable by the following modifications:

1.		Reducing the principal obligation from $3,900,000 to $3,120,000.
2.		Extending the maturity date from December 31, 2020, to January 1, 2024.
3.		Reducing the interest rate from 12% to 10%.

Barkley pays interest at the end of each year. On January 1, 2024, Barkley Company pays $3,120,000 in cash to Cullumber Bank. Answer the following questions related to Cullumber Bank (creditor).

(a)

What interest rate should Cullumber Bank use to calculate the loss on the debt restructuring? (Round answer to 0 decimal places, e.g. 18%.)

Interest rate

%

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(b) The parts of this question must be completed in order. This part will be available when you complete the part above.

(c) The parts of this question must be completed in order. This part will be available when you complete the part above.

(d) The parts of this question must be completed in order. This part will be available when you complete the part above.

(e) The parts of this question must be completed in order. This part will be available when you complete the part above.