Accounting for a Troubled Debt Restructuring

question 84

Essay

Accounting for a troubled debt restructuring
On December 31, 2020, Riverside Inc. is in financial difficulty and cannot pay a $ 350,000 note (with $ 35,000 accrued interest payable) to Stockton Corp. Stockton agrees to forgive the accrued interest, extend the maturity date to December 31, 2022, and reduce the interest rate to 4%. The present value of the restructured cash flows is $ 299,500.
Instructions
Prepare entries for the following:
a) the restructure on Riverside's books
b) the payment of interest on December 31, 2021
c) the restructure on Stockton's books.

---

Definitions:

Personal Gossip

The informal sharing of private or sensitive information about individuals within a social network without their permission, often leading to rumors or breaches of trust.

Vertical Communication

The exchange of information and messages between different levels of an organization's hierarchy, including upward and downward communications.

Horizontal Communication

The exchange of information, messages, or communication across the same levels of an organization or among peers.

Downward Communication

The flow of information from higher levels of an organizational hierarchy to lower levels, typically involving directives, updates, and feedback.