Cjs340
ASSETS$ 7,835,730LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIESAccounts payable$ 972,160Accrued liabilities
3. 2,071,270Accrued claims costs 793,620Federal and other income taxes 19,710Deferred income taxes 500Current maturities of long-term debt andcapital lease obligations 50,610Short-term borrowings 249,250Total Current Liabilities 4,157,120LONG-TERM LIABILITIESCapital lease obligation 54,580Note Outstanding 3,000,000Mortgage Outstanding 608,030Other liabilities 95,860Total Long-term Liabilities 3,758,470
4. Total Liabilities 7,915,590SHAREHOLDERS EQUITY (DEFICIT)Common stock, $.01 par value; authorized500,000 shares; issued 231,000 shares 2,310Additional paid-in capital 731,090Accumulated other comprehensive loss (113,500)Retained earnings (deficit) (639,180)Treasury stock (60,580)Total Shareholders Equity (Deficit) (79,860)TOTAL LIABILITIES AND SHAREHOLDERS EQUITY$ 7,835,730As stipulated, your company is having financial difficulty and has asked the bank to restructure its $3million note outstanding. The present note has three years remaining and pays a current interest rate of10%. The present market rate for a loan of this nature is 12%. The note was issued at its face value. Thebank agrees to accept land in exchange for relinquishing its claim on this note. The land has a bookvalue of $1,950,000 and a fair value of $2,400,000.Part AProvide your manager a comparison of the current reporting for debt, explaining therequirements for each type (bond, mortgage, capital lease, and others). Then, prepare the journalentry for the restructuring.
5. Example of disclosure below:Type of DebtBonds/NotesCarrying ValueAmortized proceeds plus unamortizedissue costs*Accrued InterestCarried as interest payableDisclosuresDescribe any property carried as collateralincluding book valueNature of debt, interest rate, maturityschedule, embedded optionsFair value of debt if estimable
6. Five year maturity scheduleOtherNon-interest-bearing notes also carriedat
3. 2,071,270Accrued claims costs 793,620Federal and other income taxes 19,710Deferred income taxes 500Current maturities of long-term debt andcapital lease obligations 50,610Short-term borrowings 249,250Total Current Liabilities 4,157,120LONG-TERM LIABILITIESCapital lease obligation 54,580Note Outstanding 3,000,000Mortgage Outstanding 608,030Other liabilities 95,860Total Long-term Liabilities 3,758,470
4. Total Liabilities 7,915,590SHAREHOLDERS EQUITY (DEFICIT)Common stock, $.01 par value; authorized500,000 shares; issued 231,000 shares 2,310Additional paid-in capital 731,090Accumulated other comprehensive loss (113,500)Retained earnings (deficit) (639,180)Treasury stock (60,580)Total Shareholders Equity (Deficit) (79,860)TOTAL LIABILITIES AND SHAREHOLDERS EQUITY$ 7,835,730As stipulated, your company is having financial difficulty and has asked the bank to restructure its $3million note outstanding. The present note has three years remaining and pays a current interest rate of10%. The present market rate for a loan of this nature is 12%. The note was issued at its face value. Thebank agrees to accept land in exchange for relinquishing its claim on this note. The land has a bookvalue of $1,950,000 and a fair value of $2,400,000.Part AProvide your manager a comparison of the current reporting for debt, explaining therequirements for each type (bond, mortgage, capital lease, and others). Then, prepare the journalentry for the restructuring.
5. Example of disclosure below:Type of DebtBonds/NotesCarrying ValueAmortized proceeds plus unamortizedissue costs*Accrued InterestCarried as interest payableDisclosuresDescribe any property carried as collateralincluding book valueNature of debt, interest rate, maturityschedule, embedded optionsFair value of debt if estimable
6. Five year maturity scheduleOtherNon-interest-bearing notes also carriedat