At January 1, 2016, Clayton Hoists Inc. owed Third BancCorp $18million, under a 10% note due December 31, 2017. Interest was paidlast on December 31, 2014. Clayton was experiencing severefinancial difficulties and asked Third BancCorp to modify the termsof the debt agreement. After negotiation Third BancCorp agreedto:
•
Forgive the interestaccrued for the year just ended.
•
Reduce the remainingtwo years’ interest payments to $1 million each.
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Reduce the principalamount to $17 million.
(FVof $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tablesprovided.)
Required:
1.
Prepare the journal entries by Third BancCorp necessitated by therestructuring of the debt at January 1, 2016, December 31, 2016 andDecember 31, 2017. (Enter your answers in whole dollars. If noentry is required for a transaction/event, select “No journal entryrequired” in the first account field.)
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