Question
In: Accounting
Moriarty Co. is experiencing financial difficulties. Income has exhibited a downward trend, and the company reported...
Moriarty Co. is experiencing financial difficulties. Income has exhibited a downward trend, and the company reported its first loss in company history this past year. The firm has been unable to service its debt and, as a result, has missed two semiannual interest payments. In an attempt to turn the company around, management has negotiated a modification of its debt terms with bondholders. These modified terms are effective January 1, 2013. The bonds are $10,000,000, 10-year, 10% bonds that were issued on January 2, 2008, and currently have an unamortized premium of $210,000.
Prepare the necessary journal entries on Moriarty's books for each of the following independent situations. If no entry is required, select "No Entry Required" and leave the amount boxes blank.
a. Bondholders agree to forgive past-due interest and reduce the interest rate on the debt from 10% to 5%. If no entry is required, select "No entry required" from the dropdown. If an amount box does not require an entry, leave it blank.
b. Bondholders agree to forgive past-due interest and forgive $3,000,000 of the face amount of the debt. If no entry is required, select "No entry required" from the dropdown. If an amount box does not require an entry, leave it blank.
c. Bondholders agree to forgive past-due interest, reduce the interest rate on the debt from 10% to 6%, and forgive $2,000,000 of the face value of the debt. If no entry is required, select "No entry required" from the dropdown. If an amount box does not require an entry, leave it blank.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
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