Question
On December 31, 2020, American Bank enters into a debt restructuring agreement with Stellar Company, which is now experiencing financial trouble. The bank agrees to
On December 31, 2020, American Bank enters into a debt restructuring agreement with Stellar Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $2,540,000 note receivable by the following modifications:
1-Reducing the principal obligation from $2,540,000 to $2,032,000.
2- Extending the maturity date from December 31, 2020, to January 1, 2024.
3- Reducing the interest rate from 12% to 10%.
Stellar pays interest at the end of each year. On January 1,2024 , Stellar Company pays $2,032,000 in cash to American Bank.
Assuming that the interest rate Stellar should use to compute interest expense in future periods is 1.4276%, prepare the interest payment schedule of the note for Stellar Company after the debt restructuring. (Round answers to 0 decimal places, e.g. 38,548 .)Step by Step Solution
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