At January 1, 2018, NCI Industries, Inc., was indebted to First Federal Bank under a $240,000, 10% unsecured note. The note was signed January 1, 2014, and was due December 31, 2019. Annual interest was last paid on December 31, 2016. 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

Required:

Prepare the journal entries by NCI Industries, Inc., necessitated by the restructuring of the debt at: (1) January 1, 2018; (2) December 31, 2018; and (3) December 31, 2019.

Question

Business

Jakayla Wood

11 February, 03:20

At January 1, 2018, NCI Industries, Inc., was indebted to First Federal Bank under a $240,000, 10% unsecured note. The note was signed January 1, 2014, and was due December 31, 2019. Annual interest was last paid on December 31, 2016. 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

Required:

Prepare the journal entries by NCI Industries, Inc., necessitated by the restructuring of the debt at: (1) January 1, 2018; (2) December 31, 2018; and (3) December 31, 2019.

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Answers (1)

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Alfonso Gross · Answer 1

The Journal Entries will be as follows;

Explanation:

1) Interest Expense Dr.$11,555

Interest Payable Cr.$11,555

2) Interest Payable Dr.$11,555

Bank Cr.$ 11,555

3) Interest payable Dr.$11,555

Bank Cr.$11,555

Notes Payable Dr.$240,000

Bank Cr.$240,000