Question
On December 31, 2014, Firth Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-interest-rate note. The note was issued to yield 10% interest.
On December 31, 2014, Firth Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-interest-rate note. The note was issued to yield 10% interest. Unfortunately, during 2016, Firth began to experience financial difficulty. As a result, at December 31, 2016, Paris Bank determined that it was probable that it would collect only $75,000 at maturity. The market rate of interest on loans of this nature is now 11%.
Instructions
(a) | Prepare the entry (if any) to record the impairment of the loan on December 31, 2016, by Paris Bank. |
(b) | Prepare the entry on March 31, 2017, if Paris learns that Firth will be able to repay the loan under the original terms. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started