Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Wildhorse Corp. currently has an issued debenture outstanding with Abbra Bank. The note has a principal of $ 2 million, it was issued at face

Wildhorse Corp. currently has an issued debenture outstanding with Abbra Bank. The note has a principal of $2 million, it was issued at face value, and interest is payable at 7%. The term of the debenture was 10 years, and it was issued on December 31,2016. The current market rate for this debenture is 9%. Wildhorse has been experiencing financial difficulties and has asked Abbra Bank to restructure the note. Both Wildhorse and Abbra Bank prepare financial statements in accordance with IFRS. It is currently December 31,2023.
For each of the following independent situations related to the above scenario, prepare the journal entries that Wildhorse and Abbra Bank would make for the restructuring that is described.
Abbra Bank agrees to modify the note by allowing Wildhorse not to pay the interest on the note for the remaining period. (Hint: Refer to Chapter 3 for tips on calculating and use the time value of money tables.) Assume that the bank had not previously recognized any loss on impairment. (Round discount factors to 6 decimals e.g.0.527500 and final answers to 0 decimal places, e.g.5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. List all debit entries before credit entries.)
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.
On the books of Wildhorse Corporation:
Account Titles and Explanation
Debit
Credit
Notes Payable
Gain on Restructuring of Debt
On the books of Abbra Bank:
Account Titles and Explanation
Debit
Credit
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting Reporting Analysis And Decision Making

Authors: Shirley Carlon, Rosina Mcalpine, Chrisann Lee, Lorena Mitrione, Ngaire Kirk, Lily Wong

7th Edition

0730395294, 978-0730395294

More Books

Students also viewed these Accounting questions