Question

On December 31, 2017, American Bank enters into a debt restructuring agreement with Blossom Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $4,200,000 note receivable by the following modifications: 1. Reducing the principal obligation from $4,200,000 to $3,360,000. 2. Extending the maturity date from December 31, 2017, to January 1, 2021. 3. Reducing the interest rate from 12% to 10%. Assuming that the interest rate Blossom should use to compute interest expense in future periods is 1.4276%, prepare the interest payment schedule of the note for Blossom Company after the debt restructuring. (Round answers to 0 decimal places, e.g. 38,548.) BLOSSOM COMPANY Interest Payment Schedule After Debt Restructuring Effective-Interest Rate Date Cash Paid Interest Expense Reduction of Carrying Amount Carrying Amount of Note 12/31/17 $ $ $ $ 12/31/18 12/31/19 12/31/20 Total $ $ $ Part 4 Prepare the interest payment entry for Blossom Company on December 31, 2019. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit December 31, 2019 Part 5 What entry should Blossom make on January 1, 2021? (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit December 31, 2021 Blossom pays interest at the end of each year. On January 1, 2021, Blossom Company pays $3,360,000 in cash to American Bank.

On December 31, 2017, American Bank enters into a debt restructuring agreement with Blossom Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $4,200,000 note receivable by the following modifications:

1. Reducing the principal obligation from $4,200,000 to $3,360,000.
2. Extending the maturity date from December 31, 2017, to January 1, 2021.
3. Reducing the interest rate from 12% to 10%.

Assuming that the interest rate Blossom should use to compute interest expense in future periods is 1.4276%, prepare the interest payment schedule of the note for Blossom Company after the debt restructuring. (Round answers to 0 decimal places, e.g. 38,548.)

BLOSSOM COMPANY
Interest Payment Schedule After Debt Restructuring
Effective-Interest Rate
Date
Cash Paid
Interest Expense
Reduction of Carrying Amount
Carrying Amount of Note
12/31/17
$
$
$
$
12/31/18
12/31/19
12/31/20
Total
$
$
$

Part 4
Prepare the interest payment entry for Blossom Company on December 31, 2019. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit
December 31, 2019

Part 5
What entry should Blossom make on January 1, 2021? (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit
December 31, 2021

Blossom pays interest at the end of each year. On January 1, 2021, Blossom Company pays $3,360,000 in cash to American Bank.