Question

At January 1, 2024, Clayton Hoists incorporated owed Third BancCorp $32 million, under a 10\% note due December 31,2025 . Interest was paid last on December 31, 2022. Clayton was experiencing severe financial difficulties and asked Third BancCorp to modify the terms of the debt agreement. After negotiation Third BancCorp agreed to do the following:

Note: Use oppropriote foctor(s) from the tobles provided. (EV of S1, PV of S1, EVA of S1. PVA of S1. EVAD of S1 and PVAD of S1)
- Forgive the interest accrued for the year just ended.
- Reduce the remaining two years' interest payments to $1 million each.
- Reduce the principal amount to $31 million.

Required:
a. Prepare the journal entries by Third BancCorp necessitated by the restructuring of the debt at January 1, 2024, December 31 , 2024 and December 31,2025

Answer 1

The student is seeking journal entries for debt restructuring at Third BancCorp. Without specific terms, we cannot provide accurate entries, but they would likely include adjustments to note payable, interest payable, and interest expense. The provided examples of Singleton Bank and Acme Bank are not relevant to this question.

Step-by-step explanation:

The student is asking for journal entries related to debt restructuring at Third BancCorp due to Clayton Hoists Incorporated's financial difficulties. The original debt obligation was a $32 million note with 10% interest due on December 31, 2025, with the last interest payment being made on December 31, 2022. Given the alteration of the terms of debt, Third BancCorp must adjust its balance sheet to reflect the new terms of the agreement starting on January 1, 2024, as well as account for interest and any principal adjustments on December 31 of 2024 and 2025.

Unfortunately, without the specific terms of the restructuring, it's impossible to provide accurate journal entries. Such entries would commonly include adjustments to the note payable, interest payable, interest expense, and any potential recognition of a gain or loss on debt restructuring if the carrying amount of the debt changes. Typical entries might also reflect a modified interest rate or an extension of the maturity date.

It should be noted that the hypothetical reserve and loan values provided for Singleton Bank or Acme Bank along with details related to open market operations or Zimbabwean currency are not relevant to answering this question regarding Third BancCorp's debt restructuring journal entries.