Reference no: EM132794671
YOU Company had a ?6,000,000 notes receivable from ME Company due on December 31, 2019. The note bears 10% interest and yields 12%. The books reported accrued interest of ?600,000 on this date. On the due date, because of financial distress being suffered by ME Company,
YOU Company agreed to the restructuring and modification of the term as follows:
a. Reduction of Principal amount of 5,000,0000.
b. Reduction of interest to 8% payable annually beginning December 31,2020;
c. Effective interest rate as of date of restructuring is 14%.
d. Accrued interest on December 31,2019 was paid; and
e. Principal payment was reset to December 31, 2022.
REQUIRED:
Problem 1: How much is the impairment loss recognized by YOU Company on December 31, 2019?
Problem 2: At what amount should the restructured notes receivable be reported at December 31, 2020?
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