Question - At January 1, 2016, NCI Industries, Inc., was indebted to First Federal Bank under a $240,000, 10% unsecured note. The note was signed January 1, 2012, and was due December 31, 2017. Annual interest was last paid on December 31, 2014. NCI was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. First Federal agreed to reduce last year's interest and the remaining two years' interest payments to $11,555 each and delay all payments until December 31, 2017, the maturity date.
Required: Prepare the journal entries by NCI Industries, Inc., necessitated by the restructuring of the debt at: (1) January 1, 2016; (2) December 31, 2016; and (3) December 31, 2017. (If no journal entry is required for a particular transaction, select "No journal entry required" in the first account field.)
1) Record the interest expense.
2) Record the interest expense.
3) Record the interest expense.
4) Record the payment of the debt.