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On January 1, 2021 B&B Company owed Second National Bank of Charlotte $ 24 million under a 10% loan (note) that comes due on 12/31/2022. The loan requires interest-only payments each year on 12/31 and the principal amount of $ 24 million is due in full at 12/31/2022. B&B last paid interest on 12/31/2019. they were unable to make their 12/31/2020 payment due to financial difficulties B&B filed for Chapter 11 reorganization late in 2020 and, as part of the negotiation with creditors, Second National is considering two alternatives to settle and/or modify the terms of the loan agreement. They are: 1. Accept as full payment from B&B real estate fland) with a fair market value of $ 22.5 million B&B purchased this land back in 2015 for $ 15 million 2. Forego the interest owed from 2020. Reduce the interest payments for 2021 & 2022 to $ 900,000 each year (3.75% interest rate) REQUIRED: a. In the space below, prepare the journal entries that would be made by B&B Company (the debtor) on January 1, 2021 under each of the above scenarios. Alternative 1: 1/1/21 Alternative 2 (show work/calculations] 1/1/21 Alternative 2: (show work/calculations) 1/1/21 b. Assume for purposes of this question only that the book value of the total debt owed by B&B to Second National was $24.75 million on 1/1/21, and the estimated future cash flows after the reorganization were $ 26.5 million to be paid on 12/31/2022). What would be B&B's approximate effective rate of interest over the final two years of the agreement? Use the PV table posted in Blackboard to help find your answer. $1 PV LOM 15 20 2. 2.0 25 40 45 SON UN LOW 70% 3.0 .. 10.0 MON 20.01 1 099010 098522 40039 097551 097087 09615 096154 95694 0.95238 0.04787 0.94340 093454 G9253 0.01743 0.000000 ans 20:38030 097056 096117 095181 094260 093351 092454 091573 90703 089345 020000 0.8734 085734 0.54100022645 562 79719 30.97059 095632 094232 0.92060 0.91514: 0.90194 088900 0.87630 0.25384 0.85161 0.3962 0.81530 79389 077218 0.75131 0.73119 0.71178 0.57810 4 0.95098 094313 092385 90595 0.8849 097144 085480 0.83856 0.82270 080722 079209 0.76250 0.73503.70543 068301 0.6587 0.63553 422 5 0.95141 092836 090373 088385 086261 014197 0.82199 0.80245 0.7855) 076513 074726 071299 0.0 054993: 062002 059545 56743 0.40166 600205 091454 0.80797 0230 0.8.374 0 0.750 0.76790 6.74622 0.72525 24M 066614 083017 OS OMAT O.44 0.1 0.33490 7 093272 090103 087056 0.54127 0.81309 0.785 07192 073483 071066 06744 US 062275 056349 05470) 051316 0.40164 046725 2704 0.92348 0871 0.85340 0.82075 074 075541 070 070719 061654 0.65160 052741 201 0.54027 50187 046651 0471 0.4056 633257 2014.34 067498 0.03676 0.00073 076642 73373 0 70250 067290064661 061763 090190 0.54193 050025 0.4604) 0.49410 0.11092 0.36061 019301 10090529 086167 082035 076120 7400 010012 0.67556063 061791 054) 6 50835 46319042341 03554 3218 032197 016151 2 O 0.80436 0.724 724 0.6640 ose 6.6.20 0.4 0.4 OS 040 0.20 03 04 031728 628744 0.034 12 088745 00369 0.78849 04116 0.70138 066178 0.62460 0 055664 012798 0490 0.64401 09715 03 031853 020584 00 010016 13687066 082403 077303 0.73542 0.68095 0.64 0.60057 0946477 5012 56 6684 0419 0.36770 03618 0266 01 022917 346 14 0.05 081105 0.757 0.70773 0.66112 0.6177007740 05.1997 OSO507 0.47257 044230 0.3702 045 0.3 026333 0.21 0.30162 009789 15 0.16135079005 0.74901069047 064185 989 0.5556 051672 0.48102 0.493 041777 076345 31524 0.21454 025 02000018270 0.01491 N 0.15902 03 0.72845 0.6936206231 0.52571 0.5331 0.4947 0.47454 0.65 0.3730299 0.2057 2053 0.1 01405 17 0.84430 07769 0.71416 065720 060502 055730 051337 047318 047630 040345 037136 0165) 702 0.21107 0.1974 1963 1964 004507 18 0.8:3602 0.75491 070016 0.64117 056739 053836 0.4363 0450 041552 038147 034 0.06 021025 021199 01796 0.15282 0100 0756 19 0.82774 0.75361 0.6664) 0.62553 0.57029 0.53010 0.47464 0.43330 0.10572 0.36156 0.51 0.27651 023171 0.15449 016351 01376 0 11611 00130 20 0:31954 2.74247 0.57297 061027 0:55360050259 0.45411 0.41464 0.37689 0307 03110025041 0.21455 0.17843 014064 0.13403 0.10307 000 MM 0.0925500304 21 0.3 0.73150 0.65978 0.595.) 0.52755 0.40557 0.43633 0.1979 0.3594 0.32466 0.24 0.24151 0.1066 0.53900050 24 0.78757 0.69954 0.62172 0.55288 0.49199 0.43796 0.30012 034770 0.1007 0.27666 024696 0.19715 015770 0.12640 0.10153 0.00170 C 2012 25 0.77977 0.68921 0.60953 0.52939 0.47761 0.42315 037512 0.33273 0.29530 026223 0.23.300 0.78425 014502 0.11557 0.0923 0.07361 052 00104 28 0.75694 0.65910 0.57437 0.0008 0.43709 038165 0.33348 0.29157 0.25509 0.22332 0.19563 015040 011901 s 0.00034 005 00417 0.000 29 0.74934 0.64936 056311 0:4386 0.4245 0.36875 0.32065 0.27902 024295 0.21 018456 14056 0.10731 00215005304 0.0489 00373 000506 0.0741 Q 0.0038 075.37 0.03 0.0003333 0.00421 30 0.74192 0.63976 0.55207 0.47674 0.41199 0.528 0.30832 0.25700020118 0.20054 31 0.73458 063031 054125 046511 0.299 034423 0.29646 0.25550 022036 015012016425 0.12277 0.09202 091505210 0.00935 0.029000035 40 0.67165 0.55126 0.45289 0.37243 030656 025257 070829 0.17199 014205 011746 0.09723 667804603 0.03184 0.02209 001598 0005 0.000 On January 1, 2021 B&B Company owed Second National Bank of Charlotte $ 24 million under a 10% loan (note) that comes due on 12/31/2022. The loan requires interest-only payments each year on 12/31 and the principal amount of $ 24 million is due in full at 12/31/2022. B&B last paid interest on 12/31/2019. they were unable to make their 12/31/2020 payment due to financial difficulties B&B filed for Chapter 11 reorganization late in 2020 and, as part of the negotiation with creditors, Second National is considering two alternatives to settle and/or modify the terms of the loan agreement. They are: 1. Accept as full payment from B&B real estate fland) with a fair market value of $ 22.5 million B&B purchased this land back in 2015 for $ 15 million 2. Forego the interest owed from 2020. Reduce the interest payments for 2021 & 2022 to $ 900,000 each year (3.75% interest rate) REQUIRED: a. In the space below, prepare the journal entries that would be made by B&B Company (the debtor) on January 1, 2021 under each of the above scenarios. Alternative 1: 1/1/21 Alternative 2 (show work/calculations] 1/1/21 Alternative 2: (show work/calculations) 1/1/21 b. Assume for purposes of this question only that the book value of the total debt owed by B&B to Second National was $24.75 million on 1/1/21, and the estimated future cash flows after the reorganization were $ 26.5 million to be paid on 12/31/2022). What would be B&B's approximate effective rate of interest over the final two years of the agreement? Use the PV table posted in Blackboard to help find your answer. $1 PV LOM 15 20 2. 2.0 25 40 45 SON UN LOW 70% 3.0 .. 10.0 MON 20.01 1 099010 098522 40039 097551 097087 09615 096154 95694 0.95238 0.04787 0.94340 093454 G9253 0.01743 0.000000 ans 20:38030 097056 096117 095181 094260 093351 092454 091573 90703 089345 020000 0.8734 085734 0.54100022645 562 79719 30.97059 095632 094232 0.92060 0.91514: 0.90194 088900 0.87630 0.25384 0.85161 0.3962 0.81530 79389 077218 0.75131 0.73119 0.71178 0.57810 4 0.95098 094313 092385 90595 0.8849 097144 085480 0.83856 0.82270 080722 079209 0.76250 0.73503.70543 068301 0.6587 0.63553 422 5 0.95141 092836 090373 088385 086261 014197 0.82199 0.80245 0.7855) 076513 074726 071299 0.0 054993: 062002 059545 56743 0.40166 600205 091454 0.80797 0230 0.8.374 0 0.750 0.76790 6.74622 0.72525 24M 066614 083017 OS OMAT O.44 0.1 0.33490 7 093272 090103 087056 0.54127 0.81309 0.785 07192 073483 071066 06744 US 062275 056349 05470) 051316 0.40164 046725 2704 0.92348 0871 0.85340 0.82075 074 075541 070 070719 061654 0.65160 052741 201 0.54027 50187 046651 0471 0.4056 633257 2014.34 067498 0.03676 0.00073 076642 73373 0 70250 067290064661 061763 090190 0.54193 050025 0.4604) 0.49410 0.11092 0.36061 019301 10090529 086167 082035 076120 7400 010012 0.67556063 061791 054) 6 50835 46319042341 03554 3218 032197 016151 2 O 0.80436 0.724 724 0.6640 ose 6.6.20 0.4 0.4 OS 040 0.20 03 04 031728 628744 0.034 12 088745 00369 0.78849 04116 0.70138 066178 0.62460 0 055664 012798 0490 0.64401 09715 03 031853 020584 00 010016 13687066 082403 077303 0.73542 0.68095 0.64 0.60057 0946477 5012 56 6684 0419 0.36770 03618 0266 01 022917 346 14 0.05 081105 0.757 0.70773 0.66112 0.6177007740 05.1997 OSO507 0.47257 044230 0.3702 045 0.3 026333 0.21 0.30162 009789 15 0.16135079005 0.74901069047 064185 989 0.5556 051672 0.48102 0.493 041777 076345 31524 0.21454 025 02000018270 0.01491 N 0.15902 03 0.72845 0.6936206231 0.52571 0.5331 0.4947 0.47454 0.65 0.3730299 0.2057 2053 0.1 01405 17 0.84430 07769 0.71416 065720 060502 055730 051337 047318 047630 040345 037136 0165) 702 0.21107 0.1974 1963 1964 004507 18 0.8:3602 0.75491 070016 0.64117 056739 053836 0.4363 0450 041552 038147 034 0.06 021025 021199 01796 0.15282 0100 0756 19 0.82774 0.75361 0.6664) 0.62553 0.57029 0.53010 0.47464 0.43330 0.10572 0.36156 0.51 0.27651 023171 0.15449 016351 01376 0 11611 00130 20 0:31954 2.74247 0.57297 061027 0:55360050259 0.45411 0.41464 0.37689 0307 03110025041 0.21455 0.17843 014064 0.13403 0.10307 000 MM 0.0925500304 21 0.3 0.73150 0.65978 0.595.) 0.52755 0.40557 0.43633 0.1979 0.3594 0.32466 0.24 0.24151 0.1066 0.53900050 24 0.78757 0.69954 0.62172 0.55288 0.49199 0.43796 0.30012 034770 0.1007 0.27666 024696 0.19715 015770 0.12640 0.10153 0.00170 C 2012 25 0.77977 0.68921 0.60953 0.52939 0.47761 0.42315 037512 0.33273 0.29530 026223 0.23.300 0.78425 014502 0.11557 0.0923 0.07361 052 00104 28 0.75694 0.65910 0.57437 0.0008 0.43709 038165 0.33348 0.29157 0.25509 0.22332 0.19563 015040 011901 s 0.00034 005 00417 0.000 29 0.74934 0.64936 056311 0:4386 0.4245 0.36875 0.32065 0.27902 024295 0.21 018456 14056 0.10731 00215005304 0.0489 00373 000506 0.0741 Q 0.0038 075.37 0.03 0.0003333 0.00421 30 0.74192 0.63976 0.55207 0.47674 0.41199 0.528 0.30832 0.25700020118 0.20054 31 0.73458 063031 054125 046511 0.299 034423 0.29646 0.25550 022036 015012016425 0.12277 0.09202 091505210 0.00935 0.029000035 40 0.67165 0.55126 0.45289 0.37243 030656 025257 070829 0.17199 014205 011746 0.09723 667804603 0.03184 0.02209 001598 0005 0.000