On december 31 2003 the merchant bank enters into a debt, Ask an Expert

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On December 31, 2003, the Merchant Bank enters into a debt restructuring agreement with Shrek Company, which is now experiencing financial trouble. The bank agrees to restructure a 10%, issued at par, $1,000,000 not receivable by the following modifications:

1. Reducing the principal obligation to $500,000
2. Extending the maturity date to 12/13/2006
3. Reducing the interest rate to 8%

Prepare all journal entries from 12/31/2003 to 12/32/2006 for both parties (debtor and creditor), and discuss the interest rate assumed by the debtor and creditor after the restructuring.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9976413

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