Halstead Associates loaned Stevens Company 600 000 on

January 1 2013 #6492

Halstead Associates loaned Stevens Company $600,000 on January 1, 2013. The terms of the
loan were payment in full on January 1, 2018, plus annual interest payments at 10%. The
interest payment was made as scheduled on January 1, 2014; however, due to financial
setbacks, Stevens was unable to make its 2015 interest payment. Halstead considers the loan
impaired and projects the following cash flows from the loan as of December 31, 2015, and
2016. Assume that Halstead accrued the interest at December 31, 2014, but did not continue to
accrue interest due to the impairment of the loan.Projected Cash Flows:Instructions:1. Prepare
the valuation adjusting entry at December 31, 2015.2. Prepare the journal entry to record the
$40,000 receipt on December 31, 2016.3. Prepare the valuation adjusting entry at December
31, 2016.4. Prepare the 2017 journal entries, assuming the receipt of $140,000 as scheduled;
also assume that estimates for future cash flows remain the same as they were at the end of
2016.View Solution:
Halstead Associates loaned Stevens Company 600 000 on January 1 2013

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