Question

InTrouble company was experiencing financial difficulties. It owed DoingWell company $70,000 plus 3 years interest totaling $16,800. DoingWell has offered to restructure the debt by forgiving the unpaid interest, reducing the principal to $65,000, and extending the maturity date 4 years with interest payments at 4%. What journal entry would be made for the next year? Does InTrouble owe more or less now?

Answer 1

Since, In Trouble company owed & 70000 and 3 years Interest To Kalling & 16800 to But going well. But Doing well forgiven the Interest payable for 3 years and also reduced Principal $ 65000 Now, Here Given Principal is $ 65000. Introuble company to Time Given, 4 yrs. And Interest Payable Each installment would be = Espoo =$16250 4 1.6465000 - 4 x 65000 = 3400 100 Notestere In rate, 4% is which means, un cas only payable for the sum, only given jor four years. If 4000 pead the would have given, then, we would have calculated the Interest yearly 4.1. for the outstanding aman So, Now, we will also divide by (for four years) = 34,99 $850. Entry for Nent year will bei- Interes Payable Abc To Cash Ale been Interest 4 loan Payable Me Sebit $16250 Credit $ 850 $19 100