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On January 1, 20X1, Twain Corp. borrowed $20,000 from Clemens, Inc. Twain Corp. promised to repay the $20,000 on January 1, 20X6 (5 years).
On January 1, 20X1, Twain Corp. borrowed $20,000 from Clemens, Inc. Twain Corp. promised to repay the $20,000 on January 1, 20X6 (5 years). Twain also promised to pay interest of $1,000 annually on January 1, 20X2-20X6. No bad debt expense had been recorded on the loan, and Twain's interest rate had increased to 10% on January 1, 20X2. On January 1, 20X2, Twain contacted Clemens to say it was unable to pay the interest due and the two parties agreed to restructure the note as follows. Clemens uses the effective-interest method to record impaired loans. Use the present value tables provided and round all amounts to the nearest dollar for the two situations that follow.
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