Amanda Corp.owned a major business building in a small Canadian city.The building has a $1,555,000 mortgage that is held by a Canadian financial institution (FI).Amanda Corp.has had recent cash flow problems,in part,due to the low vacancy rates in the business buildings.Interest is 15 months in arrears and totals $132,000.After discussions with the FI,they agree to a financial reorganization in that they accept $50 preferred shares at a value of $1,490,000,retractable in 15 years time at book value.The shares have first claim on the proceeds of the business building,should it be sold.
Required:
Prepare the journal entry to record the exchange.

Question

Quizplus · Accepted Answer

The Answer of Amanda Corp.owned a major business building in a small Canadian city.The building has a $1,555,000 mortgage that is held by a Canadian financial institution (FI).Amanda Corp.has had recent cash flow problems,in part,due to the low vacancy rates in the business buildings.Interest is 15 months in arrears and totals $132,000.After discussions with the FI,they agree to a financial reorganization in that they accept $50 preferred shares at a value of $1,490,000,retractable in 15 years time at book value.The shares have first claim on the proceeds of the business building,should it be sold.
Required:
Prepare the journal entry to record the exchange.