Jordan,Inc. ,loaned Julius Company $40,000 on January 1,2010.The 8 percent,7-year,simple-interest loan note called for annual interest payments each December 31.The note is due December 31,2023.Julius made the required interest payments through December 31,2013.In early January 2014,Julius began to default on some of its other debts and asked Jordan to renegotiate the original debt agreement,including an extension of the maturity date.Jordan refused but could see that the remaining scheduled payments on the loan were in jeopardy.
Jordan reevaluated the Julius note and estimated that the remaining interest payments would be only three-fourths of the original amount (based on the original principal amount),and that only one-half of the principal amount would be collected.
Jordan uses the interest method to account for interest after recording a note impairment.
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The Answer of Jordan,Inc. ,loaned Julius Company $40,000 on January 1,2010.The 8 percent,7-year,simple-interest loan note called for annual interest payments each December 31.The note is due December 31,2023.Julius made the required interest payments through December 31,2013.In early January 2014,Julius began to default on some of its other debts and asked Jordan to renegotiate the original debt agreement,including an extension of the maturity date.Jordan refused but could see that the remaining scheduled payments on the loan were in jeopardy.
Jordan reevaluated the Julius note and estimated that the remaining interest payments would be only three-fourths of the original amount (based on the original principal amount),and that only one-half of the principal amount would be collected.
Jordan uses the interest method to account for interest after recording a note impairment.
Required: